After languishing for three months in a sideways consolidation, gold has finally begun moving up again. This is encouraging for gold investors, but there are still obstacles to be overcome before it can be considered to be fully in the clear.
On the daily line chart we can see the descending triangle that defines the entire one-year period. This is a bearish pattern -- the flat side is the weakest. On the positive side is the wide-based double bottom (December and May). The shorter-term rising triangle has contained price for about three months, and this week the price index broke out of that formation.
The next obvious area of resistance is the top if the large triangle which defines the one-year period of correction that began from the all-time high last August. If that line of resistance is decisively penetrated, I think it will signal the beginning of a move to new, all-time highs, although there are some horizontal lines of resistance that could slow things down.
The weekly chart also delivered some good news this week when the weekly PMO crossed up through its EMA. This is very positive.
Conclusion: Gold is not out of the woods yet, but the technicals are improving. This week's rally could be the beginning of a move to new, all-time highs, first a breakout is needed.
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Technical analysis is a windsock, not a crystal ball.
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