On November 30 – just a few short days ago – it looked as if gold was set up perfectly for a head and shoulders reversal pattern. Maybe a few days of consolidation and then whammo!
However, I wasn’t convinced as the action at the right “shoulder” was sitting right at support of its 10, 30 and 50 day moving averages. As well, the dollar was turning tail at its highs near 81.50.
The results have since negated any H&S patterns and the move higher continues. I am looking, however, for strength to 1,450 in gold before some kind of correction takes place. At that point, especially if it happens quickly, there will suddenly be a lot of separation between price and the 50-day, and we’ll have to revert to the mean again at some point. Surely the Euro Zone will come out with another “issue” that’ll drive the dollar back up and metals into correction.
For now, this is an awesome run, with Silver crossing above 30 and miners looking strong as well.
Stay sharp and trade the extremes.