Unexpected selling hit the gold market hard in Wednesday's session after comments by US Federal Reserve Chairman Ben Bernanke spurred a rally in the US Dollar. The initial over-reaction in the precious metals appears to have triggered stop-loss orders at several key levels to drag the price down dramatically by the end of the day. Autochartist identified the move as it reached key resistance and backed off, setting the stage for what appears to be a significant technical breakout. The move is illustrated here on the Autochartist 240-minute time frame.

Gold futures had been moving higher in an orderly Rising Wedge chart pattern throughout the month of February, with the last up-thrust into the upper resistance trend line occurring near $1,800 per ounce. The reversal at first appeared to be a typical pullback to the Rising Wedge support near $1,750 per ounce, which would have been the level for a bounce if the uptrend were going to continue. Once this level was breached, the downside breakout was confirmed as short sellers entered and stop-losses were hit.

The ensuing momentum has carried the price of gold half way to the breakout target already, but more potential remains. The projected rice target calls for a minimum move to $1,636 per ounce. A reversal back above $1,750 would be needed to negate the bearish short-term outlook.

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