JAN 20, 2012 Gold at the Cross Road It was 32 years ago today, January 21, 1980 that

gold made its first long term wave high. The fundamental driving force of that move was the removal of the Gold standard in August of 1971. It was the seminole point in the 2nd half of the 20th Century and yet, went completely unnoticed by the majority of the populus. For those of us over the age 57 (give or take a few years) we all remember where we were when we heard JFK had been assassinated. Or John Lennon. And Bobby and Martin.

But does anyone remember where we were when Real money was assassinated (removed) ?

The technical picture suggests a major long term wave completion is upon us. The total wave structure includes the "three steps forward and one step back" pattern. Three cycles up and one down. Elliot would count 5 waves up and 3 waves down but the idea is the same.

The cyclical price analysis on the chart shows the major lows that have developed in this current wave which began at the low and end of the first debt and currency panic of 2008. The suggests that this is a point in "Time" where gold attempts to return to a bull market mode. From a time basis, that last wave was a Fibonacci 34 month up wave that culminated in the first week of Septembe 2011.

In order for the correction to complete in this "time frame" gold has to exit the rounding Green Gann Arc and then enter into the upper portion or quadrant. This window of time for a major trend change is most likely at this point. The time cycles have lined up, and price is arriving at the center of attraction where price is going to make its decision of whether gold is now ready to go attack the 2000 area or if it needs more time inside this correction. This current window of time is open from January 17th thru the 24th for immediate entry into the upper quadrant marked enter here. This cycle should run into the February 7th thru the 15th time frame where a strong move up into the middle of February can develop. Depending on price decision at this 'window of time" we'll either look to trade long up to the 1900-2100 area or if price decides to take the road back to 1588.5, we'll look to play it on both sides. A MOVE ABOVE THE CENTER OF ATRACTION AREA will increase the odds significantly that the correction in gold is complete and new highs will be in play

Gold with a less technical tilt -- but with the same story

Gold has run into some important resistance at the 1670 area where the dotted up and downtrend lines reside. That is the cross road we are discussing. The long term trend remains up inside this green momentum channel. It takes a push above the dotted line crossing. A weekly close above the cross and the green line labeled target #2 will come into play.

There is additional resistance at the middle green channel line at the 1750 to 1775 area and that would become the target on a price surge above the cross road. Price is also at the daily moving averages so its a short term make or break area.

Its also important to note the fundamentals coming into play. Next week is the Chinese new year. In 2010 and 2011, gold made its lows right at the week of the Chinese New Year and never looked back. However, 2008 and the last liquidity crisis found gold peaking in February (think target #2 on the chart) and pulling back in March. Regardless, the one constant is whether gold will be above to move above this 1680 - 1700 for week January 23rd.

A failure at this area next week would favor a pullback into the first week of February and another reset and consolidation before its next attempt. Once the cross road is broken, the odds will favor the upside into February. The long tern trend still up, but the medium term has been in a correction that dropped 20% of price value. This coming week is the first attempt to turn the medium trend back up.

We can see on the WEEKLY LEVEL that the oscillator is still in a downward position. At this time, the Major Weekly Bearish Reversals are 1522.7 and 1405.8. Thus, only a weekly closing below 1522.7 will signal that an immediate downtrend could retest long-term support. According to our model, the Minor Weekly Bearish Reversals are found at 1588.5 and 1542.8, followed by resides at 1479.7. Consequently, only a weekly closing below 1588.5 will signal that a sell-off is likely to follow. On a long-term basis, our Reversal System indicates that our Major Weekly Bullish Reversals are 1680.1, 1730.5 and 1762.9. In order to see a reversal in trend, gold would have to close ABOVE 1762.9 on a weekly basis. The weekly turning points are coming into the end of January and to stabilize this market gold has to at least accomplish a weekly closing above 1680.1.

SILVER

Silver moved up to our target area and is making a bid to enter into 2011 price territory. The move to 32 this week arrives at first resistance. The long term blue line is where the bull/bear battle line exists. This blue line is a 9 year old line that has separated all the major highs of this entire bull run. When it began in 2003, this blue line stood at 6 dollars. That price penetration above it in early 2011 that set off the major spike up to 50 was the first time that price had ever exceeded the long term blue line.

Hui Gold Stock Index The HUI gold index has been in a massive choppy and overlapping pattern all year. This is now the 5th time we hold the 480 area in the HUI. This area is the line in the sand and we've been using the 480-520 area for quite a while. A break below this area would warn of a test into the 400-420 area. The medium term trend remains neutral --- and yet another bounce attempt is to try and get out of this dangerous area. There is a dip that usually happens this time of year as many of the higher lattitude gold mines close for the winter. What we usually see is a buy point gets set up in the January timeframe and then a rally takes place into April/May. Perhaps the strangest thing is why are the gold stocks ready to break down and for gold bullion to break out higher. There can be only two reasons if you really think about it. Either the gold stocks are waiting for gold and silver to peak right at this point in time and both the metals and gold are about to take a deflationary turn lower ---- OR -----Gold and silver are so strong that the gold stocks are making their LOWS RIGHT HERE at the winter seasonal dip and are about to move higher in a strong move back up to the 600 area. Regardless of the the fundamentals and every single bullish or bearish arguement out there --what i've addressed above sets the pace for what can happen. There are no other options ------ unless you favor that they are going to go sideways forever. Thus to recap, which ever side that price on the HUI takes out of the bull/bear zone should set the pace for the next two weeks. Since price has held the lower line for 15 months, its prime real estate for the 'control boyz' to try and take a shot at clearing the stops below. Which ever way we come out of the bull/bear line should set the pace now into the first or second week of February.

Disclaimer: Not hing I say is advice, please do your own research and consult a licenced f inancial advisor. Remember t hat invest ing and t rading is risky