-- Posted Thursday, 20 August 2009 | | Source: GoldSeek.com
By: Peter A. Grant
As we discussed in Tuesday’s MarketMinute, a symmetrical triangle has emerged in the spot gold market since the last probe above $1,000 back in February. As the apex of the triangle is approached, an eventual breakout becomes more and more imminent.
The following is a definition of the symmetrical triangle from Investopedia:
A chart pattern used in technical analysis that is easily recognized by the distinct shape created by two converging trendlines. The pattern is identified by drawing two trendlines that connect a series of sequentially lower peaks and a series of sequentially higher troughs. Both trendlines act as barriers that prevent the price from heading higher or lower, but once the price breaches one of these levels, a sharp movement often follows.
This pattern is also frequently referred to as a coil. The market builds up energy — like a spring being compressed — as it coils in an increasingly narrow range. Breakouts can often-times be dramatic.
The last time we had such a nicely formed triangle in the gold market was during the 2006/2007 consolidative period. When the breakout eventually came, it resulted in a 50% gain (more than $300) to new all-time highs at $1032.20.
In fact, if you look back over the last several years there have been a series of triangle consolidative patterns, which have resulted in successively higher prices.
A couple things I’ve learned over my many years as a technical analyst: Breakouts are more likely to come in the direction of the dominant trend, and the dominant trend in gold remains bullish.
Initial objectives are derived by measuring the base of the triangle and projecting from the point of the breakout. The base of the current developing coil is a big one, just like the one before it.
Peter A. Grant
Pete Grant is the Senior Metals Analyst and an Account Executive with USAGOLD - Centennial Precious Metals. He has spent the majority of his career as a global markets analyst. He began trading IMM currency futures at the Chicago Mercantile Exchange in the mid-1980's. In 1988 Mr. Grant joined MMS International as a foreign exchange market analyst. MMS was acquired by Standard & Poor's a short time later. Pete spent twelve years with S&P - MMS, where he became the Senior Managing FX Strategist. As a manager of the award-winning Currency Market Insight product, he was responsible for the daily real-time forecasting of the world's major and emerging currency pairs, along with gold and precious metals, to a global institutional audience. Pete was consistently recognized for providing invaluable services to his clients in the areas of custom trading strategies and risk assessment. The financial press frequently reported his expert market insights, risk evaluations and forecasts. Prior to joining USAGOLD, Mr. Grant served as VP of Operations and Chief Metals Trader for a Denver based investment management firm.
http://www.usagold.com/
-- Posted Thursday, 20 August 2009 | Digg This Article
| Source: GoldSeek.com
