Gold Smashes Through $1000

Last Thursday I rushed out a piece saying that gold looked odds on to hit $990 and that after that $1000 would be in traders’ sights. Gold touched the $1000 mark overnight and confirmed the move this morning.

Gold didn’t just tickle $1000 this morning; it placed both feet firmly over the line, briefly breaking $1005, and within a sniff of February’s $1006 high. So where next?

For me gold will break February’s high, probably before this post hits the screens. The next target is $1028, the high seen in March 2008, and after that it’s finger in the air time. The weekly chart looks good; the RSI isn’t overcooked and the pattern looks good for a break to new highs.

However, there should be a better buying opportunity than now. The daily RSI is flashing out overbought signals at 74, the price is straying well outside the upper Bollinger band, and there’s a lot of clear water between the price and its 21-day moving average.

None of these are sell signals, and I’m certainly not looking to sell against a move like this, but they all point to a strong likelihood of a correction. My best guess is that $1000 is too new to act as strong support yet and that the price could drop back to August’s $970 high, and quite possibly the 21-day moving average at around $960.

Burberry
Retailers to the chavs, Burberry has had a remarkable run, culminating in a top 100 place on Thursday when it replaces Thomson Reuters in the FTSE. The share price is up 240% on November’s low and pretty much back to its 2008 high.

The daily chart looks good for a bit more, but I decided to move up to the weekly chart for a longer-term perspective.

First off, I reckon there’re a couple of key levels that the price needs to hold above at the end of the week. The price has been fighting to stay above its 200-week moving average for the past few weeks; note the doji candles signalling indecision before the FTSE news gave it a turbo-boost to a clear break through the 500p barrier.

Today’s move also propelled it through the final Fibonacci obstacle, the 61.8% retracement of May 2007’s high to November 2008’s low.

If the price holds these levels (200-week MAV, 500p, Fib 61.8%), it should open the gates to the 530p, seen briefly in 2008, then onwards to the 100% retracement at 724p.

On the other hand, Mr Grumpy here reckons the price is due a small set-back; look at the weekly RSI of 76. As always, that’s not a reason to sell, more likely it’s a pointer that there should be better opportunities to climb aboard the chav express in the next few weeks.

The issue of joining the FTSE is a tricky one; a lot of funds will already have the shares, but some of the large index-trackers are more tightly governed as to when they can re-balance their portfolios. I’ve found over the years that there’s no point in being clever and trying to out-guess them, just treat it as something to be wary of on Thursday.

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