All That's Gold
Asia is celebrating the new Lunar Year -- the Year of the Rat. Rats were welcomed in ancient times as a protector and bringer of material prosperity. We decided that the best way to herald in a year of prosperity, was to kick off a brand new column! Charting Asia features our regular CNBC Asia contributor Daryl Guppy of guppytraders.com. Every week, Daryl will review, analyze and chart his way through a company, a commodity or currency making waves in Asia.
Our inaugural column features a long time favorite commodity in Asia -- gold. Spot gold hit a lifetime high of $928.60 just a couple of weeks ago. Platinum hit a record high for the ninth straight trading session on Tuesday as a power crisis in South Africa, which produces some 80 percent of the world's metal, took its toll on output. Precious metals are hot commodities and this is how gold is charting.
The weekly gold chart includes several interesting technical features. The dominant trend line is Trend Line A. It commences in mid-2005 and defines the central trend that has dominated the gold price. A lower, and parallel trend line started in 2006, October. This trend line was broken in 2007 July by a sideways consolidation. However, the lower Trend Line B provides a strong support feature in the current rising trend.
The upper parallel trend line starts with the 2006 January highs. It excludes the 2006 May peak but captures the 2006 July peak. The placement of the upper and lower trend lines is not exact, but they provide a useful analysis tool for projecting support and resistance levels as gold moves into the equivalent of 'blue sky' charting areas.
In the short term the upside target for gold is defined by Trend Line C. The primary support level for any retreat is defined by the long term Trend Line A. Any move below Trend Line A finds initial support near $840. A significant decline tests the strong support level defined by Trend Line B. This support level is confirmed with the lower edge of the 2007 November consolidation near $780.
The strong uptrend in gold has no technical limits. The clustering activity near Trend Line C suggests continued upside targets moving towards $1,000. This is a psychological barrier and may trigger a consolidation pullback. There is no technical or charting feature that confirms this development.
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