Does Mr. Fibonacci like gold?

by JDH on February 28, 2015

As this is the last day of February, and since in Ontario, Canada the temperature did not rise above the freezing mark at all this month, let’s put the month behind us by looking at gold.  To do so, let’s examine the chart (click to enlarge):

Gold-Feb-27-2015

This is a six month chart, and I’ve drawn in the Fibonacci lines.  The bottom was in early November at $1,130.40.  The Top was $1,307.80 in late January, for a total increase of $177.40.  A Fibonacci retracement would be 38.2%, 50%, or 61.8% of that advance.  If my math is correct, a 61.8% retracement would be around $1,198.17.

So what?  As the chart shows, the “bottom” at the start of the week was exactly $1,190, very close to an exact Fibonacci level.  From that bottom gold has inched higher.  It is therefore possible that the correction from mid January has ended, and gold will move higher.

Of course the alternate interpretation is also possible, and that is that gold is going down, and will continue to go down.

For the alternate view, here’s the same chart, but for the last three months:

Gold-3months-Feb-27-2015

As this chart shows, the down-trend line remains intact, and will be until gold is over $1,240.

So, it would appear, the play is simple:

First, assume that gold has put in a temporary bottom, so now is not the time to sell.

Second, if gold gets about $1,240, assume that it has some life, and will continue upward, at least temporarily.  Will it?  Who knows.  I’m just a guy drawing lines on charts.  I will say that I’m not selling.

Freezing in the cold, buy not selling.

More next week.  Thanks for reading.