Gold: Breaking Out?

Gold has been smacked down pretty severely, falling 14.4% in the past six months.  But, the charts suggest it will soon be time to start melting down that jewelry again.

GC has reached the lower bound of a well-formed channel that dates back to 2000.  While not every channel bottom tag results in a reversal, odds are this one will.

In Sep 2011, GC topped out at 1923.  Since then, it has traced out several descending triangles in a row — breaking out of each one in turn.  Each breakout has been followed by a very deep retracement or back-test and subsequent breakout.

The latest back-test is most likely completed, clearing the way for a test of the highest yellow dashed TL presently up around 1740.

But, it’s worth noting that the previous breakouts have all ended up around the same price level: 1800ish.

Were the next breakout to advance at the same slope as previous ones, and were it to backtest the LT channel’s .25 line as occurred in Oct 2012, we could see a 14.4% rally by mid-June.

It’s difficult to draw such a long-term channel with absolute precision, so there’s a small possibility that the true channel bottom is closer to 1525.  But, the daily RSI suggests the next move will be higher.

If I’m wrong, and this latest bounce fails, we’ll know pretty quickly with a bearish drop through horizontal support at 1525ish. So, watch your stops.


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