The outlook for Gold

The gold market has pulled back significantly since the high of 1228 was made in early December 2009. In the language of the technical analyst the pullback is charting out a falling wedge formation which is a bullish continuation pattern. The trend is still up and i am getting interested in a swing trade in Gold in which i shall be betting that the Gold price is going to move up again and challenge the the high of last month. IT IS STILL EARLY DAYS.

The question is now when to join the party. There are three interesting features on the chart.

1. On the daily chart the falling wedge pattern would seem to have broken on the up side and is now coming back to KISS the trend line, defining the top of the falling wedge . This is common when a trend line is broken and is caused by the fact that the big traders would rather jump of a cliff than CHASE a market. Chasing does not work with girls or markets .

2. Whether you believe that Fibonacci numbers are absolute or that the levels are self fullfilling the Gold market, from years of observation, loves them. On the daily chart the next FIB level (0.786) is about 1069 which is pretty much where the gold market should kiss the down sloping trend line mentioned above. Technicans call this a confluence of support.

3. On the weekly chart the last significant low is at 904. If a FIB retracement is constructed from that low to the high of December last there is a 50% retrace at a level of 1066.

In other words at around 1065-1070 there are three important measures of support . I reckon that this is where the Gold market is going and represents a good place to consider a trade long.

This is still a few days away. I will shout when we get to this level and have had some confirmation from the market that Gold is on the turn.