A Note From Alf Fields

January 18, 2011 05:14 PM

Dear CIGAs,

Firstly, to finish off on the ultra short term, here is the chart I showed a couple of days ago:

Note the small a-b-c correction from $1420. The A leg was from $1420 to $1363, a decline of $57. If the C wave is the same size, a decline of $57 from $1412.50 takes us to $1355.50.

Yesterday the PM fix was $1360.50 and the morning fix $1357.50.

Conclusion: gold has either already finished the correction or requires one minor drop below yesterday’s fixings to finish it.

Turning to the longer term picture, I sent you the following weekly price chart in mid 2009.

This is what has happened since then:

I have numbered the minor waves and concluded that wave 5 is extending. This opinion is based on the size of the corrections since the wave 4 low at $1058. The following analysis of the minor waves and their relative proportions should make this quite clear:

Wave 1 ___ 712.5 to 989.0 ___ +276.5 ___ +38.8%
Wave 2 ___ 989.0 to 870.5 ___ –118.5 ___ -12.0%
Wave 3 ___ 870.5 to 1212.5 ___ +342.0 ___ +39.3%
Wave 4 ___ 1212.5 to 1058.0 ___ -154.5 ___ -12.7%
Wave 5 ___ is extending – see analysis below.

Note: The similarity of the 12% declines above indicate that they are part of the same impulse wave. The much smaller declines of 7.9% and 5.9% are evidence that wave 5 is extending.

Extended wave 5:

Wave 5.i ___ 1058.0 to 1256.0 ___ +198 ___ +18.7%
Wave 5.iiv ___ 1256.0 to 1157.0 ___ -99 ___ -7.9%
Wave 5.iii ___ 1157.0 to 1421.0 ___ +264 ___ +22.8%
Wave 5.iv ___ 1421.0 to 1337.5 ___ -83.5 ___ -5.9%
Wave 5.v ___ 1337.5 to 1642.0 ___ +305 ___ +22.8% (forecast – assumes the same % gain as 5.iii)
Total 5 ___ 1058.0 to 1642.0 ___ +584 ___ +55.2%

If we assume that 5.v is an average of the 5.i and 5.iii gains of 18.7% and 22.8%, say 20%, the target for 5.v would be $1604. One further possibility is that the gain in wave 5 equals the overall gain in waves 1 through 3, i.e. $1212.5 from $712.5 = $500. This provides a target of $1058 + $500 = $1558.

This concludes the end of intermediate wave I of Major Three. The decline to follow the peak of wave I, (the peak being somewhere between $1558 and $1642), should be of a magnitude of between 16% to 22%.

I think that we can conclude that your $1650 forecast will come close to achievement during the up-move which should start this week.

Best wishes,
Alf Fields

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