‘Golden Cross’ Signal Suggests $3,500 Gold Price

By Dominique de Kevelioc de Bailleul

Probably the most significant indicator employed by technical traders to signal them to initiate trades triggered a very important ‘Buy’ signal on Thursday.

The well-known and ubiquitously-used technical indicator, called the ‘Golden Cross’, gave the ‘green light’ to scores of buyers of gold bullion, when the price settled above the $1,770 level on Thursday.

And the last time the gold market reached a Golden Cross moment, the point at which the 50-day MA crosses the 200-day MA, gold bullion rallied to $1,917.90 on Aug. 23, 2011, from approximately $938.00 set on Feb. 11, 2009—a slightly more than a double price move within 31 months.

Prior to that, the Golden Cross triggered another major buy signal on Aug. 10, 2005, when gold touched $441.  Twenty months later, the gold price broke through $1,000 for the first time ever, touching $1,032 on Mar. 17, 2008, for a gain of 134 percent.

Seemingly lofty and daring predictions of gold $3,500 may not seem so lofty or daring, after all.  While the gold price has resumed its 12-year secular bull market, following the QE3-to-infinity decision by the FOMC on Sept. 12, the target price for gold to top out at the peak of the next bull phase calculates to $3,894—$1,770 X 120 percent.

The average of the two time periods of higher gold prices, following the Golden Cross buy signal, is 25 months, taking the anticipated rally in the gold price to Oct. 2014.

Considering the more serious implications to the global economy of the Fed’s policy of QE3-to-infinity, compared with QE1, Twist and QE2, Egon von Greyerz’s most sensational expectations for $3,500 gold within 18 months is quite reasonable.