The bull market in gold is proving itself once again this week as world stock markets, led by banking shares, tumbled once again and sent investors flocking to the precious metals complex. Nearby gold futures surged to recover most of the losses incurred during the brief recovery and are now poised to test the previous all-time high of $1,915 an ounce.

Despite the $200 per ounce correction in gold during the brief stabilization of the markets towards the end of August, little if any technical damage was done to the longer term charts. The rapid recovery following the sell-off suggests intrinsic strength in the market, with both speculators and conservative investors clearly positioned on the long side to buy dips and add to positions on the way up.

In what appears to be the end of the correction, gold futures wandered higher inside a consolidation range between $1,702 and $1,850 per ounce. This brief phase of indecision allowed the rising trend to re-establish itself by forming an Ascending Triangle chart pattern. The pattern, illustrated here on the 240-minute time interval saw a strong breakout to the upside at the end of last week's trade.

The breach of resistance to move above this large and clearly defined formation found heavy buying on high momentum to propel the price above $1,880 per ounce by Friday's close of trading. While this has been an impressive move already, the projected price target based on the breakout from the Ascending Triangle calls for a continuation of the rally to a minimum price of $1,908 per ounce and an upper end of the range at $1,982 per ounce. The bottom end of this forecast would place the price at a possible level to form a double top on the chart. The higher end of the forecast would greatly exceed the previous high and set a new record for gold while also placing it very near the $2,000 per ounce level.

Prior to the current gold bull market, which essentially began in 2001, the previous high near $850 per ounce occurred in January of 1980. Adjusting for inflation, an equivalent high in today's dollars would equal $2,250 per ounce. As the current forecast implies a continuation of the parabolic rise on the charts, a successful print at the high end of the forecast would likely find very strong speculative buying action to move the market even further towards a test of this price level.
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