In association with

Market Bulletin 7th October 2010

No reversal yet in Gold

The Technical Trader’s view:

Gold 100 Troy Oz. COMEX Continuous

1500

1450 WEEKLY CHART

1400

1350

1227.50 1300
The medium-term in the
1250 Gold market looks very
1200 attractive.
1150

1033.90 High
1100
The initial catalyst for the
1050
bulls was surely the Head
1000
and Shoulders continuation
950
pattern that drove the
$873 Prior High in 1980 900 market today to its minimum
850 target of 1350 or so.
800

Prior High support $732 But the creation of a

750
Continuation Triangle has
700
given the market a
additional catalyst to drive it
650
better. The minimum move
2008 M A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J J A S O N D
implied by that pattern is
1475.

Look closer.

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accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
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Gold 100 Troy Oz. COMEX Dec 10 1385
100.0% 1380
1375
1370
1365
1360
DAILY Dec 10 CHART
1355
1350
1345
Continuation Triangle 1340
1335
1330
1325
1320
The Triangle has been a
1315
1310
1305
1300
powerful bull stimulus.
1270.60 High 61.8% 1295
1255.10 High 1290
1285
1280
1275
1270
1265
1260
And the upper diagonal will
1255
1250
1245
act as good support on any
1240
1235
1230
1225
pull-backs.
1220
1215
1210
1205
1172.20 High 1200
1195
1190
1185
Today the market seems to
1180
1175
1170
1165
have baulked at the
0.0% 1160
1155
1150
1145
resistance of the band of
1140
1135
1130
Fibonacci extensions 1370-
1125
1120
1115
1110
1380 and may indeed come
1105

200000 back to the 1290 level to test

150000
that support.
100000

50000

12 19 26 3 10 17 24 1 7 14 21 28 6 12 19 26 2 9 16 23 30 7 13 20 27 4 11 18
Certainly the good volumes
May June July August September October
and rising open interest do
not suggest a trend reversal
yet….despite the violence of
today’s trading.

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
The Macro Trader’s view:
The latest leg of the long Bull run in gold began back at the end of August, when the market
made a succession of new all time highs, but today the market spiked higher and then sharply
reversed.

Is this the end of the rally, the end of the trend or just yet another round of profit taking?

First, we need to understand what drives this market. Over the last several years Gold has
rallied mainly during periods of Dollar weakness and or geopolitical tension. Most recently the
main dynamic has been Dollar weakness.

But Gold is also supported by economic uncertainty and the policy mix that is generating. It is
well understood that the Dollar is weak because of the fragile nature of the US recovery, but
there are also serious concerns about the strength of recovery in the Euro zone, Japan and
now the UK too.

The response from policy makers has been a little different in each case:
1. In the US the administration continues to preside over a very large budget deficit and
debt build up with the Fed contemplating a new round of QE,
2. In the Euro zone, fiscal austerity has been the masterplan after the Sovereign debt
crisis earlier this year almost broke the Euro, with the ECB supplying sufficient liquidity
rather than QE,
3. In Japan the economy remains in the grip of deflation, the authorities are now
intervening to weaken the Yen and the BOJ has cut rates to zero and announced a
Bond purchase program,
4. In the UK the recently-elected government has put together a severe fiscal
consolidation that may cause several quarters of slow growth and perhaps tip the
economy back into recession. The response of the Bank of England has been to
contemplate a restart of QE.

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
So in three of the larger economies the Central Bank is either reactivating or close to
reactivating QE. The Gold market currently has little to fear from QE regarding inflation,
globally it is tame, although less so in the UK.

But what un-nerves investors and attracts them to Gold is the nature of the current economic
climate and the policy responses it requires. Quite literally no one really knows how all this will
end since other post WW11 recessions have been completely different.

While the likes of Fed chairman Bernanke has studied the great depression at great length no
two economic periods are the same. The world is a very different place to the 1930’s with many
previously economically primitive countries now economic powerhouses that are challenging
the older developed economies for dominance.

This is why we judge Gold is currently so attractive to investors and indeed Central Banks.
Since the current environment looks like persisting at least into much of next year, gold looks
set to make yet more all time highs, so for us, we are now likely witnessing a correction which
should ultimately provide fresh buying opportunities.

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.