Use Fibonacci Ratios to Unlock the Secrets of Gold

• Posted by Greg Harmon
• on November 5th, 2014

Gold had a monster run higher from 2001 until late 2011. This created many Gold Bugs, as well as Gold Pushers. What ever story you were selling worked. Gold just kept going up. But the story got derailed a bit in mid 2011 as it hit all time high levels again. From that point it moved sideways in what can now be seen as a consolidating topping pattern until early 2013. Still a lot of noise from Gold Pushers and Gold Bugs defending their position.

Then it got interesting as Gold started to move lower. The first move down hovered around 1300 and stayed there until September this year. Now it is resuming its move lower and leaving some interesting statistics in its wake.

The first thing you should notice in the monthly chart of Gold above is the break of the major 9 year trend line in purple that started the move lower. But maybe more important are the places it stopped along the way. First was at 1540 and right at a 23.6% retracement of the 10 year uptrend. The second was centered in a symmetrical triangle around 1300, and at a 38.2% retracement of that trend higher.

Fibonacci ratios, measured as retracement and extensions, can play a major role in where a stock, commodity or currency meets support or resistance. These two levels may just be scratching the surface of that in Gold.

The other important Fibonacci retracement levels occur at 50%, 61.8% , 78.6% and 88.6%. I have marked those levels on the chart as well. Being a key Fibonacci level itself means something. But follow each line to the left back to where it intersects the price chart in the rising Gold environment. Each one is tied very closely to a major support or resistance area on the way up. there was a battle over price direction between buyers and sellers at each of these levels, BEFORE THEY EXISTED.

To me it is kind of creepy that the retracement levels were important before the top was in and they could be measured. But each adds a level importance to the fact of being a Fibonacci retracement level. Now there is also real historical price history at these levels. I do not know how Fibonacci did this, but you had better pay attention to these levels as Gold continues lower. 1090 followed by 892 and 612 and 446. Will it get to all of them? I have no idea. But as it leaves the 1300 level it certainly looks like it is targeting 1090, voodoo or not.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

---

 

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through August 2014 Expiry and sign up here

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus