"It's like all shiny and stuff."
-- anonymous 13-year-old Inca upon discovering a gold nugget.
A Very Big PictureFrom a technical analysis perspective, the turning point in gold occurred in May 2002 when gold crossed $320, breaking a 15-year downtrend. The chart below also shows that gold has emerged from four years of consolidation (1998-2001) by putting in a rounded bottom. This formation, as opposed to a sharp spike, usually supplies a solid foundation to build future gains. The fact that gold held support at $320 and staged an impressive rally leads me to believe gold prices will hold recent gains and even trend higher over the next 12 to 18 months. Given the large time frame and the realization that gold won't be charging up in a straight line, a decline and retest of $320 -- or even $300 -- is entirely possible but doesn't change the thesis that gold is just midway into a multiyear advance.
|10-Year Gold ($USD) |
|*Based on New York close, 19-day moving average. |