Chris Vermeulen: Gold to Rebound to $1,775 by Year-end

A few weeks ago (August 31st) I wrote about how gold was starting to top and that everyone should expect a very sharp drop to the low $1600 area… [and] only three days later gold topped and it has not stopped falling since. At that time [however]…gold was still building the top pattern so I could not say how long a recovering would likely take nor did I know exactly when to re-enter a long position but now that we have seen how gold arrived at my target price I can form a new forecast. Words: 1078

So says Chris Vermeulen (www.thegoldandoilguy.com)  in an article which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), edited for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. 

Vermeulen goes on to say, in part:

Spot Gold Price Forecast

The gold chart below clearly shows rising volatility along with my topping pattern of three surges to new highs…On August 8th gold had a large opening gap to the upside. This means the price opened the next day much higher from where it closed the previous session. It’s important to note that gaps, especially for gold, almost always get filled within a couple months. Seeing this gave me a solid reason to think that gold should pullback to this level during the next big correction in price.

Also during the month of August gold had [two] pullbacks only to continue to make the third and final high. This told me that when the top is put in place was a very high probability that we see the price of gold drop below both of Augusts’ lows and that would trigger stop orders sending the market sharply lower.

Now that we are seeing the stops being flushed out of the market it means the majority of speculative traders who caused the large surge in gold have exited their positions…Once all the speculative traders have exited – which should take place in the coming week or two – we can expect some type of bounce or rally.

I feel gold is more fairly priced between $1632- $1660 area. Currently gold is trading [in the $1640 – $1650  range] but if things play out like I have seen in the past we just may get one more dip this week to the $1600 area before gold truly puts in a bottom.  Because gold went from a new high all the way down to Friday’s panic selling washout instead of a controlled ABC correction I feel a bottom will be more of a one day event. This type of bottom carries more risk and is more difficult to time and trade so scaling in with a small position at this level and adding on a drop to $1630 then $1600 could prove to be the safest way into a gold position.

Forward looking I see gold bottoming over the next week or two then a nice relief rally to the $1775 area. Depending on how gold arrives there will alter my next gold forecast so let’s wait and see how things unfold…

Spot Silver Price Forecast

I feel silver is in a similar situation as gold. ..[in that] a bottom is near. [As the chart below shows] silver has formed an ABC correction and the price and volume patterns seem to be in line with a typical bottoming pattern. After Friday’s massive selloff I feel silver may slide a little lower yet before putting in a bottom.

One thing to keep in mind with silver is that it is very thinly traded; there are a lot of speculative traders involved which push and pull the price to extreme levels on a regular basis so if the broad stock market continues to sell off sharply then I expect silver to follow suit.

Precious Metals Trend Analysis Trading Conclusion

The price action we have seen this year for both gold and silver indicate were are just warming up for something really big to happen. It could be a massive parabolic rally to ridiculous new highs in 2012 or it could be a large unwinding of the safe havens as countries sort out their issues and the big money starts moving out of metals and into currencies and stocks. Only time will tell.

*http://www.thegoldandoilguy.com/articles/gold-silver-pullback-as-forecasted-now-for-the-big-opportunity/

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