Gold futures continued their roller coaster path along resistance near the all-time highs above $1,900 per ounce during last week's trading. Upheavals in the currency markets led to some very sharp declines which were followed by a rapid recovery in price to the middle of a wide trading range.
Two vicious pullbacks in the price of gold occurred in a knee-jerk reaction to the Swiss intervening in the currency markets, declaring they would not allow the Swiss Franc to continue rising against the embattled Euro currency. This rattled the precious metals markets, with gold dropping over $90 per ounce as the Swiss Franc fell 10 full handles from its earlier levels.
Because Gold and the Swiss Franc have been viewed as the ultimate safe-havens by the most risk averse participants in the world markets, the two have been moving in unison against the broad market turbulence. Many foreign investors had taken to buying Swiss Franc denominated gold-backed assets as a double-up insurance policy against declining paper asset values. As it became clear the Swiss are willing to debase the value of their currency to stabilize their own domestic economy, these investors apparently began to liquidate precious metals holdings as a process of unwinding the Swiss-backed positions and find alternative avenues to hold precious metal exposure.
Thus it is not surprising that the technical drops in gold found aggressive buyers of the dips. The consolidation after the initial drop formed into a broad Triangle formation, shown here on the short-term 15-minute candlestick chart. Resistance created by this chart pattern coincided with Friday's settlement price, indicating a breakout to higher levels may occur early in the trading week ahead.
The projected forecast calls for a move higher between $1,883 and $1,909 per ounce to complete the pattern. This would recapture most of the losses from the sell-off, and position the market for another run above $1,920 and a potential surge to yet another all-time high by the end of the week.
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