Promise for Gold Bulls Bulls in 2012

 | Dec 22, 2011 | 2:30 PM EST  | Comments
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The Comex gold futures market spent the past week in a consolidative mode on the daily chart, following a downdraft of around $200 an ounce that occurred earlier this month. Some bargain hunters have stepped up to buy the dip in prices, but not in strong fashion.

The December swoon in gold prices spooked many traders and investors. But the overall longer-term technical posture for the precious yellow metal remains fully bullish.

An examination of the longer-term monthly continuation chart for nearby Comex gold futures shows prices are still in a 10-year-old uptrend from the 2001 low of $255 an ounce. During the 10 years that gold prices have been trending higher there have been significant downside price corrections within the overall uptrend.

The December price drop is so far just another unremarkable price correction in an overall bullish uptrend. For perspective, in March of 2008 nearby gold futures prices hit a then-new-all-time record high of $1,033.90 an ounce. The following six months saw prices correct to the downside by more than $350 before resuming the price ascent that eventually took gold prices to the present record high of $1,923.70, scored in September of this year.

For longer-term technical damage to begin to occur in nearby Comex gold futures, prices would have to drop below longer-term trend-line support and major psychological support at the $1,500.00 area. A drop below this important chart level would then suggest a challenge of longer-term technical support at the $1,300 price mark.

If nearby gold futures prices can hold above the December low of $1,562.50 and begin to trend higher again, the near-term technical posture of the market would improve to then suggest a test of psychological resistance at the $1,800.00 price level. And a move in gold prices above the $1,800.00 market would provide the bulls with solid near-term technical power to suggest a push above the all-time high of $1,923.70 and even a challenge of major psychological resistance at the $2,000-an-ounce price level. Given the overall technical posture of gold, the odds are better than 50/50 that gold prices will score a new record high in 2012.

The lackluster and quiet pre-holiday trading in the gold market could indeed be the value-buying opportunity for those gold market traders and investors who have heretofore been unwilling to chase prices higher.

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