Is the Gold Bull over?

Spot Gold jumped off the cliff on December 4, 2009 with a $65 single day fall yet again. It gave up about two weeks’ gain in a matter of 3 days leading to confusion and chaos in the market. Many traders must be questioning themselves – Is this IT? Has the bubble burst? Do I sell now? I say NO we are not there yet. The bubble has not burst and its time to buy not sell. There is a lot of fear in the market at this point since the Dubai World news.

One thing most of us need to know is that the Abu Dhabi (capital of U.A.E) government is ready to support most of the Dubai debt. Investors need to calm down because over the span of 6 months the situation will be better in Dubai. The sell off in Gold due to the Dubai crisis shows the panic in markets. There is an old saying: the best time to invest in a market is when panic and fear are at a high.

According to the charts, Gold is highly likely to resume its rally as buying should kick in during christmas and potentially the next month. There is a big talk in trading pits about India buying the rest of the IMF Gold. Here is what I think: it is not likely at the end of a quarter however it is very much likely during the month of January.

Crude oil will also act as support for Gold as winter has started and we should see supply constraints pushing oil higher to around $90-$95/bl.

Now, according to my charts, Gold is very likely to resume its rally in the form of wave V. Gold has strong support around 1095-1125 region where the wave IV should find its end. In normal conditions there would be another rally to 1180 and then a final down wave; however, these are not normal condition. We are in a strong bull market supported with Central Banks buying around the world, hyper inflation concerns and a falling dollar. We are possibly going back into the 1980′s inflation problems.

Summing it up, I would be a buyer at this point since we are off more than $100 from the highs. It may take some time to recover but the bull is not yet over.

Note: This is my short term chart. You can follow my trade updates in the Commodities Section of the KOAT Forums By Registering for Free Here:KOAT Financial Forums