Roger Wiegand, whom I read fully for his predictions based on collecting information from multiple sources and not just chart thinking, considers $USD at 80 to be the top, if it is reached. http://www.kitco.com/ind/Wiegand/jan222010.html He predicts trading in the range between 78.50 and 72.50 into the summer.

I don't see any real reason for gold heading lower than $1,000 down to $700, as EWI folks claim. If the Fed raises rates, it would be in a year from now at least, and then the drop would be from higher levels, perhaps $3,000 to a fraction of it. Not now.

One curious fact about commercials is that after $2,000 per ounce they will not be able to deliver gold, as there will not be enough of it for the current money supply. I was told that the Fed might ban adding any new contracts after that level. Again, the same might happen to crude oil too, at about $145pb. Till those level are reached, the rise due to speculation will be relentless IMO.

Thanks for your provocative comments!

I am sorry to hear that your brother cannot find work for so long. That's very depressing. As far as the price of oil is concerned, I believe that now it has more to do with the value of the dollar than with supply and demand. I assume that current price of $75 pb is a fair price for the current state of economy, and the economy is not going to depression within this year or a year and a half. I know that the Fed doubled the amount of money supply between August 2008 and roughly the end of last year. That money will lead to increased prices of crude oil.

If an ounce of gold is worth on average about 15 barrels of crude oil, and a price of one ounce of gold is to add $100 each month after the correction is over (sometime in March?), we will get about $1,700 per ounce of gold by the year's end (and about $3,000  by the end of next year). Dividing 1700 by 15 gives $113 per barrel of oil by the end of this year.

The above is based on hedging between gold and crude oil, which is pretty reliable in my knowledge.

A trade of the year would be to buy crude oil on a technical confirmation at about $50pb and hold it long term. Or gold. Or both.  I'd love to be disagreed with on this, so please correct me or critique my reasoning. I believe in what I said. Have a nice weekend as well!

Another observation is that a purpose of the gap is to jump over a support or resistance zone. We saw this in December during the stalemate between bulls and bears in the rectangle consolidation, till the option expiration day. Ok, now the nature of the market manipulation with futures over the weekends is clear to me: they create gaps and ease transition to the next target. Heck, tha't why the market falls so steeply now: it's rise to sky highs was artificially strong, so there is less resitance than in the other direction than it would normally have. Now Peter Campbells comment on the purpose of the such a long advance makes sense: it was engineered to recapitalize those who drive it at the expense of everyone else, to the hilt.

Now I can answer your question: we will revisit that gap, but not in wave 2. Wave 2 or B up will stop much lower than that gap zone, because it would be such an awesome shorting opportunity for everyone else. That trick cannot be played twice, now it's been exposed to the masses and it will not work again. What will happen is, the price will turn around at an odd point: a Fibbonacci retracement plus 2 or 3 points. This advance retraced 53% of the decline from 2003 to 2007. Wave 2 is (sometimes) engineered to exceed a known entrance point --such a MA(20) or EMA(20)-- by 11%, because stop loss orders are typically 10%. Or wave 2 retraces more than 61% of the decline in wave 1: most think that a move beyond 61% retracement is a genuine move in that direction. (This explains a sudden strong move after November lows above 1075, whereas before that a move up seemed weak. And remember that 1075 was around 61% of the retracement from the previous low at 1019). Quick moves are genuine moves, and they portend more action in the same direction. (In the EW parlance they are termed impulsive. Steve, if you are reading this: can you explain the purpose of extra moves beyond the minimally required number of 5 moves, such as 7, 9 or 12?)

I have plotted the Fibbonacci retracements between 1150 high and 1007=MA(200) low:

38%- 1093

50%- 1075

61%- 1057

70.7%- 1044

78%- 1032

Note that we closed at 1091, and 1075 is the 50% retracement. Now it's becoming very interesting. Now note incorrect Fib. retracements (the Fibbonacci retracements +3 and -3):

41%- 1088,    35% -1097

53%- 1071,    47%- 1079

64.8%- 1053,    58%- 1062

73% - 1039,   67%- 1048

So the current decline may turn around at 1088 (41%), 1079(47%),1071(53%),1062(58%),1053(64%). Assuming that the whole move is going to be ABC, and wave C is 61% of move A; I get 1051-1007=144, and 144:2.61=55, and 144-55=89. A drop from 1151 in 89 points would lead us to 1062, which is 58.8% retracement of the move from 1151 down to 1007.

Therefore, 1062 is a pretty realistic target for wave A down. As far as the whole move, 10% of 1150 is 115 points, leading us to 1036. The average decline so far has been 6.37%, or about 80 points, leading us to 1081. So, if 1071 is taken out, we are headed down to 1036 or 1007 for the entire move.

Disagreements and corrections are welcome!

Ok, I understand the purpose of gaps now (see my other post). I don't see it relevant to deciding where the short-term trend may reverse: the assumption that there are enough orders there at the gap that would interfere with the move in the opposite direction. Well, there are many more orders below the gap as well. In my observation, what determines the turning points is not the number of orders but the density of the orders in one place, compactly placed to obstruct further price movement. I see no reason to assume that gaps would contain a highed density of orders than normal.

Turning points occurs in two major cases: buyers (or sellers) are exhausted or they switch sides when the trend has gone too far and for too long, and when density of new sellers (or buyers) exceeds the density of existing buyers (or sellers). Then gaps could become an obstacle only if the trend has lasted long and is ripe for reversal already, so a bit higher density of orders in the opposite direction impedes the already weak trend.

There is another story to gap at 1075: 1070 to 1075 was an old resistance. To me the word resistance here matters more than the word gap.