A Hard Rain's Gonna Fall

Gather round, goldbugs, wherever you roam, and admit that the waters around you have grown, and accept what my charts to me have made known, that a new trend is soon in the making.

The gold weekly chart closed last week again beneath the grey dotted line. That line, with the trend lines above it, had captured all of the weekly closing points since 2008. That suggested a sharp downturn ahead, but I admit today's quick bounce up back to $1650 surprised me. I noticed that the center trend channel (purple) is *exactly* 10% from bottom to top, and that, remarkably, the black trend line above it is also exactly 10% higher from the purple channel. So I drew an additional trend line (black) the same distance to the bottom of the purple channel, and it looks to me like the final line of support if gold is to avoid a sharp drop to the $1500's. I generally don't short gold, but if that line, at $1620, is broken, I probably will.

Similarly, on the daily linear chart (of closing prices), $1620 looks like an enormously important level, while Jim Sinclair's $1764 level (top of red wedge) would need to be cleared to suggest, as he has been saying for a long time, a parabolic move up.

On the daily log chart below, we see that we're right at a very important trend line as well, but this one has very little slack left. Interestingly, up until the steep Feb 29 correction (blue circle), which even Gartman suspected was orchestrated, it looked like gold was headed back up to the red dotted line in the center of the channel, which had captured the uptrend for years. However, that line lay dangerously close to $1900, and it seems quite possible that such a move, given that a "double top" already occurred, would've led to a parabolic move, even before any QE announcement. So it's very possible the price is being "stepped on" down here around $1650, a level which Sinclair, if he is to be believed, says central banks are "comfortable with." It remains to be seen, though, if gold can be pushed beneath its long term trend channel (blue). Once again, we will find out very soon.

Here's the $GOLD:$USD chart, which can be interpreted as the purchasing power you have outside the US if you convert your gold into dollars, and then those dollars into a basket of foreign currencies. I think this is an important chart, because it interprets gold as the ultimate currency. Here too, a resolution is approaching. The pattern here looks bullish to me, as it has drawn a fairly perfect inverse head and shoulders.

Last week I noted the $CCI chart had painted the right shoulder of a perfect head and shoulders pattern as well. Alas, that "shoulder" didn't hold, and now we are approaching the low of last December, which had previously been hit (and become support) in late 2010, hard upon the QE2 announcement. Note that there is immense support at this level, as it marks the Fibonacci 61% retracement from the 2008 nadir (red lines), and also touches the lowermost "blade" of a Fibonacci fan (blue). With RSI in the low 30's, this chart looks very bullish to me in the short-term.

Here's the $GOLD:$CRB chart, which I take to be a measure of how badly the market wants a safe haven (since it is "adjusted" for mere inflation, which all commodities benefit from). Unlike the $CCI last week, the inverse head and shoulders here did not break down and appears to be steadily approaching the uppermost red line.

Silver is hanging in there, stubbornly resisting a fall into the pink zone, though it has been nudged into it by a hair. That suggests $30 will be tested.

However, the "10-year US Treasury yield in silver" chart is keeping the ball in play.

I think we're on the verge of some dramatic movements.