Gold price dips back to $1600 as ‘decreasing wedge’ formation coming to an end
As the slow summer month continues the gold price has drifted back to around $1600 – but when you take a look at the chart pattern forming it’s clear to see that the wedge formation, that has been nearly 3 months in the making, is going to have to break either way and soon.
From the chart we can see that from the peak last August the long-term overhead resistance currently stands around the $1675 level. But it is the wedge formation that has been forming for nearly three months that really stands out.
At the start of June gold closed at a high of around $1625. Since then it has fallen back and risen again to around that $1625 level three more times now. But each fall-back has been higher. The first pull-back was to around $1550, then $1570 and then $1590.
Now that rising support has risen to $1600, whereas the overhead resistance is still around the $1625 level. In other words there is only $25 between support and resistance – and because the resistance is rising it will reach the support level by the start of September.
In short something will have to give and the three month forming summer wedge of 2012 will (thankfully) be a thing of the past.
From a charting perspective the formation is very bullish and a break-out to the upside could see the shorts cover quickly and that longer-term resistance level (which will be in the $1670 area by the start of September) come into play.
A look at the same timeframe for the € gold price shows a similar pattern but one that has played out much more at the top of the trading range than the bottom. It also is clear just how buoyant € gold has been in 2012.
You can see that € gold has been bumping up against its long-term support the past few weeks and the steep rising support has ensured that pull-backs have been very shallow.
Support and resistance will meet at the start of September where if we get the break to the upside then we would expect to see new nominal all times highs very soon there after.
In terms of £ gold it’s a similar story.
There is one difference however – £ gold support and short-term resistance have already crossed and it now looks like that falling short-term resistance line is now being used as support.
The rising support line over the past 3 months now stands at £1020 which will now become a good gauge level to see if we’re going to break higher to that long-term support level which is sitting around the £1080. The longer £ gold holds that £1020 level the more it will look like that level will now become a very decent support level in the future.
At most there is probably only a few more weeks that this formation can go on for and when the price breaks it will probably be very quick either way. Considering how nicely the support level has risen higher and higher each time, this ‘wedge’ pattern, whilst pretty boring to watch being formed, is actually very strong technically for gold.
- Gold price falls back to $1600 ahead of Federal Reserve decision
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- Gold price retreats after getting back above $1600
- Gold price struggling to get back above $1600 as Citi says “drop money from helicopters”
- Gold price keeps testing that $1600 level
Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-dips-back-to-1600-as-decreasing-wedge-formation-coming-to-an-end-7606/