Is Gold Ready to Run to All-Time Highs?

By David Banister

NEW YORK (Market Trend Forecast) -- Just under two weeks ago, I updated my subscribers with a chart pattern on the GLD ETF (GLD), and in that update we discussed what to look for to find clues in this gold consolidation that has continued from last August-September highs.

My theory all along has been that we peaked in a "Wave 3" top at 1900-1920 last fall after a Fibonacci 34-month rally from $681 per ounce. The ensuing corrective patterns are part of a normal "Wave 4" consolidation that works off the sentiment and overbought nature of that Wave 3 updraft. Following this consolidation, I fully expect gold to continue past the $1,900 per ounce area and run to $2,300 per ounce or higher, in a Wave 5 rally into the summer of 2013.

What should we watch to get clues on when this new uptrend begins? Specifically, a close over 158 on the GLD ETF (About $1,630 on the gold charts) would confirm that the Wave 4 lows are in at the $1,520 area and the early stages of Primary Wave 5 to the upside have begun. The only downside risk I have near term, between now and October, is if we drop below 153 on the GLD ETF. That move would likely point to gold dropping to the $1,445-$1,455 per ounce area, the same low target I have had for nine-plus months now as the worst-case downside.

Advice would be to start scaling into long positions on a break over 158 on the GLD ETF and adding on pullbacks along the way up. If we can't break 158 then the advice is to sit back and watch before acting.

Below is the chart I completed for my subscribers about 10 days ago, and we continue to use it as our short-term indicator for the next leg up or down. Eventually, gold will run to all-time highs; we simply would like to time our entry and reduce our risk as much as possible.

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This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.