Why Hasn't Gold Skyrocketed After Clearing Resistance? ~ market folly

Wednesday, September 23, 2009

Why Hasn't Gold Skyrocketed After Clearing Resistance?

This is indeed a prudent question that needs addressing. We've been covering the move in gold on the blog with our technical analysis updates and paid special attention to when gold crossed the important psychological and technical resistance level of $1000. But since this big achievement, it hasn't done a whole lot. Why hasn't it skyrocketed yet?

The guys at MarketClub have identified an interesting pattern in the gold market that could possibly highlight why gold hasn't taken off yet given the fact that it broke out above longstanding resistance levels. Check out their technical analysis video here to see a possible explanation. They've noticed a pattern that gold trades in cycles where it will make a higher low every 84-90 days or so. Looking back to October of 2008, this cycle plays out for another potential higher low soon. This could potentially be a reason as to why gold isn't skyrocketing higher as near-term pressure could be weighing on the precious metal. It hit a tradable low in November 2008, January 2009, April 2009, and July 2009. That cyclical pattern points to this coming October next.

The long-term uptrend seems to still be intact, but there could be a trading range or pullback on a shorter timeframe. They also go on to highlight a similar cyclical pattern where gold could potentially be topping out every few months too, so make sure to check out the video for the full graphical representation and explanation.

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