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Gold Consolidating, Waiting For Deeper Pullback


December gold (GC) is consolidating in a triangle pattern since peaking at 1384.4 in July.  As of September 27 the price is moving lower off the top of the triangle (descending trendline) at 1348, indicating a move back toward the lows of triangle at 1305.5

While the trend is up, a drop below 1305.5 would break the triangle and signal a drop into the 1230 region (based on height of triangle subtracted from triangle low). This would bring the price very close to the 50% retracement mark of this advance (1218.50). 50% retracements in gold are quite common, at this stage of the trend, and so far in this advance we haven't seen one (although we did get a 40% retracement in May).

If the price gets close to that 1230 region, is likely a major buying opportunity. October is typically weak for gold, moving lower more than 60% of the time over the last 20 years. November is stronger though, so if we get a deeper correction in October/early November into the 1230 area that should set up well heading into the end of the year...both from a trend structure and seasonal perspective.

Figure 1. December Gold Daily Chart

False breakouts are very common though, so a slight drop below the May low of 1207 could also occur. Consider this when placing stop loss orders. If the price does that and then rallies quickly above 1220, that is a major bullish signal for the price to move back to 1350+.

From a longer-term perspective, it's likely this bull market still has legs. After the correction (if it develops) higher highs above 1384.4 are expected, but that could take well into 2017 to develop.

 

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