Gold is in a good spot right now, exactly where it needs to be to prepare for it’s prime time debut when it breaks above $1000/ounce. Ideally it would hang out in the 875-975 area for a couple of weeks, causing investors to lose patience and shake out the weak hands. You can see this churning on the ADX where the trend has rolled over and needs to reset while getting ready for the next move higher. If we drop much lower than 859 I would question whether this cup with handle pattern will play out (see next chart why that figure).
The weekly chart shows another bullish pattern in the making, a reverse head & shoulders. While the pattern won’t be complete until it breaks through it’s neckline, you can watch the daily action in this sector to monitor this development and look for clues that everything is in order for gold to reallyhave it’s day in the sun.
As for now I would hold off any new gold purchases as this sector could be under pressure as I’ve stated before for a few more weeks. This sector was quite overbought as of Wednesday, and was beginning to look toppy. But as for now I see no reason why this sector isn’t going to continue with it’s bull market.
RSI readings between 40-80 are typical ranges for bull markets.
