Shortly after the New York trading session begun, gold spiked higher and touched $1,305 an ounce. That is a 2% spread on the day, from low to high.
The daily chart (see below) shows a strong support level around $1,270 – $1,280, which we indicated with the blue horizontal line.
Since the peak of mid-March, gold has made lower highs, which should be a reason for concern, at least from a chart point of view.
However, the potentially good news for bulls is that, after touching three times the descending support line (indicated in blue as well), it seems that the gold price has moved outside that trading pattern.
Since mid-April, gold has made a first higher high.
Note how the moving averages are flattening at this point in time, a sign of consolidation.
It is critical though, as the chart pattern indicates, that $1,270 – $1,280 is NOT breached. Otherwise the bulls are in trouble.
gold price – 12 May 2014
The chart learns also that gold is ripe for a trending move.
The coming days will show whether the move will be higher or lower; both directions are still open in our opinion.
On the flip side, we should note that the metals are not really favored by two factors.
First, the miners are not bullish in terms of price action and volume. Second, from a seasonal point of view, we are entering the most quiet period of the year.
Both factors would support the bearish case, at least on the short run.
A retest of the December lows should not be excluded till July/August.
This article is brought to you courtesy of Gold Silver Worlds, who advocates to own physical gold and silver outside the banking system.