At the start of October we observed that gold was range bound, with $1680 marking the top and $1600 marking good support on the downside – effectively trading in a ‘box’ (also this and this), where it has stayed for over a month. Well on monday gold made to a bid to break $1680 which it pushed through with ease.
What is interesting is that there wasn’t a specific piece of news that caused the the take-off in gold to begin. It just seemed that the weight of financial problems engulfing the globe and the constant flip-flopping coming out of Europe plus a canceled meeting was enough to encourage a rather large buyer/buyers to come out of the woodwork and lift every offer all the way up to $1715.
It was important that there was some follow through on the tuesday to give the breakout validity. We also got that with gold trading near to $1730.
Gold price $:
gold price october 271 Gold price smashes through $1680 and out of that ‘box’
Gold price £:
gold price october 27 £1 Gold price smashes through $1680 and out of that ‘box’
Longer term gold:
GOLD IN a box1 Gold price smashes through $1680 and out of that ‘box’(click for sharper image)
Today the gold price is trading around $1711, with the new support on the downside found around the $1693 price level.
What will be very encouraging for the bulls was the power and strength of the move, it has be very decisive and very quick.
So what can we expect next for gold? Watch for a weekly close on friday above the $1730 level which would send a signal the market participants that gold wants to move higher and should bring some more buyers into the market.
A healthy move for gold will be for it to now consolidate at these levels for a few days with $1693 now the bottom of the range and $1730 offering up resistance at the top.
If it does turn out to be the decisive move before gold marches back to its all time highs of $1920, then once again the bulls will be proven correct about their analysis that the pull-back at the end of September, just like all the other pull-backs over the past 10 years, was just another healthy ‘back-and-fill’ correction like all the others.
The fact that the bulls have been proven right once again will probably do more this time for market psychology (and also much, much higher prices) than any other failed prediction that the gold bull run is over. The next time we make fresh highs expect a wave of buyers to come into the market and lead to very rapid price levels well into the $2000s.