Last chance to load up on gold. Breakout Alert. Silver is probably not far behind.

I think gold has finally broken out of its downtrend.  The 5th of 5 of C is most likely played out.  I have several reasons for believing this.

First, the technical (charting) evidence.

1. The chart has broken out of the top resistance line of the channel after having hit up against it from below and then "sliding down" it.  It would take the strength of a 3rd wave in order to break that channel like this.  Because of that I think we are looking at the beginning of wave 3 of 1 UP.  In other words, new bull market has started.  Keep in mind that I have been on bottom watch for some time now so this is no surprise to me.
2. There have been 3 hits to the lower support line.  I now think these should be numbered 1,3, and 5 respectively.  What had been throwing me was the uncommon shape of wave 2.  I now see it to be a horizontal triangle, right out of the Elliott Wave manual (look at the chart of Corrective Wave (Horizontal) Triangles, Bear Market Column, top row (SYMMETRICAL). It is totally textbook.
3. With this view of the model, 1 and 3 form a line that is almost perfectly parallel to a line between 2 and 4.
4. This model view puts the big 3rd of C gap down right where it should be.
5. Wave 2 is sideways, wave 4 is a sharp vee thus respecting EW alternation
6. Coming up off the 5th wave are 5 waves, not 3.  That tells me it is impulsive, not corrective.

Everything about this model looks kosher IMO.  I'm officially calling a bottom in gold after having initially worried about whether a failed 5th was forming in this Dec 23, 2012 post (i.e. a topping call) and then confirmed the bear market in gold in this post.  Since then I have not called any bottom in gold or silver (although I did start buying silver a couple weeks ago).  But I'm calling a bottom in gold right now and I think silver will confirm it very soon.  I think silver will touch the top of its trend line and then fall back one last time and then break out of its upper channel as well.  But for anyone interested in buying silver, I gotta tell you, now is not the time to split hairs (IMVHO of course!).  My target price for silver is $75 and it could go higher than that.  So trying to eek out the last buckeroo on the bottoming just doesn't make sense.  Dollar cost averaging is always a good strategy as well.  But there will come a point when silver confirms the gold breakout and all Hell is going to break loose with the metals to the upside.  That's just my opinion and it is a humble one but it's also one I am buying into with my own money, not just blogging about.  I have been waiting for this point for a good number of months.

Now, if the gold chart breaks back down below the green resistance turned support line, then a rethink is warranted.  But I think the odds of that happening are low.  Still, the big value of EW charting is to create trigger points where you can invalidate the model without having gone very far underwater. I only give that a 15% chance of happening at this point and the longer GLD stays above the new support line (top of channel), the less likely that 15% comes back to haunt.  This is about as good of odds as you are going to get in the game of betting on herd movements.  And if there is a large gap up in gold of $75-$100 in gold then you can be sure that the 3rd of 3 of 1 is playing out and that the bear market has a 95% chance of being over and done with.

I think the so called fundamental evidence has piled up high as well:

• People who know nothing about the way markets work and who do not understand what money is or what part gold plays in all this are calling gold "risky".
• Gold miners are shutting down production in their less productive mines because the cost of mining is higher than the spot price of gold.
• Gold mine laborers are getting raises in 3rd world $hithole gold mining operations (as opposed to being machine gunned down as before).
• Gold mining companies reducing corporate staff and are now hedging their gold production (exactly the wrong thing at the wrong time just like before means they capitulated on the price of gold).
• Goldman "We're Doing God's Work" Sachs said a bottom is near back in June.
• JP Morgan is getting out of the commodity trading (gold price manipulation) business.  It is well known that JP Morgan has been a major manipulator of both gold and silver.
• Janet "the hyper dove" Yellen is being groomed for replacing Bernanke.  That means she can come up with a whole new set of ways to debase the dollar.  Yellen if, appointed, will be the equivalent to Japan's puppet central bank chairman who was chosen by Prime Minister Shinzo Abe for the express purpose of debasing the currency and causing inflation.
• Interest rates are rising and I think that means housing prices and paper asset prices will fall.  People wanting to weather the storm will need a new safe haven (it used to be the US treasury but no longer).
• India and China are hoarding gold like never before. The COMEX is experiencing record draw downs on their physical supplies.  I think the fractional reserve gold and silver game will collapse which is what will drive massive gaps up during the large 3rd wave up which, as a result of the recent bottoming of gold, is now officially underway.
• Gold's bottoming is happening at almost exactly the 38.2% fib of the failed 5th as shown in the chart below.

There are other possible scenarios that could be playing out as well including the potential that the recent pullback from 190 in GLD was really a 4th wave in and of itself with the other large peaks in the above chart being 1 and 3.  I do not think the odds favor that outcome because of the shape of the chart.  But I would also not say it was impossible.  As usual, we need to wait until the chart gets near the old highs.  If the chart blasts out to new highs then a real large 3rd wave will be confirmed.  But if we get another double top then I'll have to revisit the model.  For now, however,  I think that the GLD ETF will likely climb to 180 at least (nearly 50% gain from here) before the market needs to rethink anything.  Time will tell.