The European investors often ask themselves if it is interesting to invest in gold since gold quotes in US dollars per ounce and the dollar declines at the same time.
I. The objectives of gold in euros.
1) Gold and its triangle.
Gold in euros should exit its triangle built since the beginning of the increase in 2000.There are two possibilities represented by a red arrow and a green arrow which give both an objective of (1) 30 % or (2) -30 %.
2) The previous triangle.
We can notice that gold in euros has already built the same type of triangle and the exit was made at the end of 1996 by the bottom of the triangle. Then the price delcined to reach the bottom of the horizontal canal.
3) Very strong signal.
The exit from the top of the triangle would be a double bullish sign : exit of the triangle and exit of the canal. It is the scenario which I privilege.
The exit of this triangle will be a very strong signal of purchase or sale in the next 3 to 5 years and the consequences on the management of the shares, the currencies and the commodities, will be very important.
II. The resistance of 350 euro is a real Maginot line for gold in euros.
1) Former support and resistance.
The zone of 350 euro was from 1986 till 1989 a support for gold. After the break down of this level in 1989, gold stayed below this 350 euros which became a resistance. Gold in euros tested twice this resistance, in 1993 and in 2002.
2) The support at the 250 euros level.
There is a very strong support at the bottom of the horizontal canal (250 euros). The support was twice tested, in 1993 and 1999.
3) Potential increase and decline
for gold in euros is 30 % and -30 %.
The direction of the exit of the triangle will give a very good indication of the price of gold in euros for the next years.
III. Short term analysis of gold in euros.
1) The short-term resistance begins around 340 euros. Since January, 2003 the gold in euros went four times to test this resistance and emcompassed it only once to get near 350 euros.
2)The real bullish signal is the break-out of the resistance at the 350 euros level.
3) The price of the gold in euros compared to the price in US dollars.
- Increase of gold in euros and in percentage: with a low at the 250 euros level and a price of 340 euros as of today, gold in euros went up 36 %.
- - Increase of gold in US dollars and in percentage: with a low at the 255 dollars level and a price of 452 dollars as of today, gold in US dollards went up of 77 %.
- Take note that the profit is the same for the European and the American investors, because for the American their profit in dollars is decreased by the depreciation of the currency.
The chart analysis gives an objective of gold in dollars of 600 dollars following the break-out of the resistance at 430 dollars. Gold in Euros has an objective of 450 euros per ounce, if it breaks the resistance at the 350 euros level. That is + 30 % for the ounce of gold in euros and + 33 % for the ounce in US dollars. The same % rise of gold between both currencies creates a problem with the scenario of the decline of the dollar with regard to the euro, thus several possibilities are forseen:
1. The analysis of the decline of the dollar with regard to the euro is false.
2. The ounce of gold in euros does not break the resistance at 350 euros and the ounce of gold in dollars rises only to 600 dollars.
3. The 600-dollar objective for one
ounce of gold is too weak.
If the ounce of gold goes to 450 euro and the dollar goes down at the same pace as during the first stage of the price increase of the ounce of gold, then the price of gold would be 770 dollars. The chart analysis of the price of gold seem bullish to me in for both currencies, but in what proportion in euros and dollars? Just wait and see.
Disclaimer : this is only my opinion, thus use of this analysis has to be made with great caution.
Dr Thomas Chaize
Translated by JoeBio