End of Gold Consolidation?

September 15th, 2012
in gold

by Erik McCurdy, Prometheus Market Insight

Editor's note: This was the Prometheus Daily Investing Thought on 09 September.  At that time the last trade for gold was 1735.20 in New York (Friday 07 September 2012).  One week later gold closed at 1770.35.  The move discussed in this article is still unfolding.

gold-bars2SMALLIn September of last year, our analysis predicted the development of a meaningful correction in gold. The long-term high formed as expected and the decline broke below cyclical uptrend support in May. However, the breakdown was not followed by a move down to new intermediate-term lows below congestion support at the 1,550 level and the correction subsequently developed into a consolidation formation.

Follow up:

Click on chart for larger image.

The Gold Currency Index (GCI) has also formed a consolidation pattern and it has begun to positively diverge from gold. While gold in US dollar terms remains well below the high in November 2011, the GCI closed above its comparable high this week.

Click on chart for larger image.

As we note often, charts do not always have a compelling story to tell, but it is important to listen to them when they do. The developing consolidation pattern on the weekly chart of gold favors an eventual resumption of the bull market and it will be important to monitor price behavior closely during the next several weeks for the next signal with respect to long-term direction. We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers. Try our service for free. If you are a current subscriber, login to read the full version of this commentary.

Several times a week Prometheus posts the Prometheus Daily Investing Thought which also appears in a window part way down the front page right hand column, just above the Video of the Day

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