A series of lower highs/higher lows often leads to the formation of a symmetrical triangle (coil). Such is the case currently with gold which has been coiling for weeks near an important price memory zone near $1300:
Click to enlarge
Since the April 2013 gold crash the $1300-$1325 area has served as a powerful magnet for price. With the coil tightening recently, the probability of a decisive breakout from the range have increased significantly - from the stockcharts.com section on symmetrical triangles:
"The ideal breakout point occurs 1/2 to 3/4 of the way through the pattern's development or time-span. The time-span of the pattern can be measured from the apex (convergence of upper and lower lines) back to the beginning of the lower trend line (base).
Edwards and Magee suggest that roughly 75% of symmetrical triangles are continuation patterns and the rest mark reversals. The reversal patterns can be especially difficult to analyze and often have false breakouts. Even so, we should not anticipate the direction of the breakout, but rather wait for it to happen. Further analysis should be applied to the breakout by looking for gaps, accelerated price movements, and volume for confirmation. Confirmation is especially important for upside breakouts."
With the symmetrical triangle at roughly its 3/4 point a resolution during the next week would be potentially quite powerful. While the Edwards and Magee statistic regarding symmetrical triangles as continuation patterns is certainly true most of the time, from my estimation the current setup in gold is a coin flip; the volume-by-price 'air pocket' between $1400 and $1500 offers a tantalizing upside target, seasonality is very bullish for the next 6 weeks, and sentiment remains quite downbeat, whereas the trend since late-2012 is clearly lower and price has been unable to sustain above $1320 for any significant period of time.
The CBOE Gold Volatility Index (GVZ) also offers reason to believe a big move in gold could happen very soon:
As evidenced by the above chart, the tightening range in the gold price has lulled options market participants into a relative sense of complacency. Historically when the GVZ has fallen to such low levels a large move in gold was not far away:
While the technicals paint a mixed picture in terms of price direction, there are mounting signs that a big move is brewing for gold....
If the next move is not up after a 3 year correction then th egold bull must be over. I don’t think anyone believes that.
Hi!, Patrons Of CEO CA Et AL:
In my personal opinion so far the gold price represents a non event in terms of the historical purchasing power gold use to represent, How so? Well, looking at their Chart Book you can obtain ffrom The American Institute For Economic Research in Great Barrington. Mass, (888) 528-1216, their first chart tracks the purchasing power of the US $ giving it a price of around 2 cents in terms of purchasing power today. So, when gold in 2011 reached $1,922 that’s a mere $38.64 in purchasing power isn’t it? Now, reader, please explain how that laxity in purchasing power can possible cover the actual increased costs from inflation we the people have been forced to pay sense President Nixon closed the gold window on August 15, 1971? We the people have therefore and thereby been forced to incrementally raise prices accordingly plus asking thereby for higher wages in an attempt to keep pace with rising prices. Gold has not helped plus any higher price anyone gets paid than they pay for gold creates a capital gains tax does it not? What do we the people plead in OUR own defense: The Middle Class has disappeared!! Will that phrase bring down prices and raise wages?
RUSS SMITH, CA. (One Of Our Broke, Fiat Money States)
resmith1942@gmail.com
Marty. A mere $50 billion keystroke by the Fed into the the likes of Goldman, Morgan Stanley or any other gold cabal reprobate entity and you have total worldwide control of all of the precious metals complex including the miners. Remember the Fed extended $18 trillion to the ECB credit facility and no one ever questioned that abomination. So what’s a nominal amount like $50 billion when we talk in terms of trillions these evils days.