More Time Before Breakout

Until gold breaks out of the triangle consolidation pattern, it will be trading inside the range. Since the range has been narrowing volatility has been declining. This can also be observed by the convergence of the two moving averages. That may be a clue that a potential spike in volatility is getting closer. The pattern is within a bull trend and near the top of the trend. Therefore, the expectation is for a bull breakout unless there are signs of pattern failure.

Notice that the pattern is an expansion of an original symmetrical triangle that is marked by dotted trendlines. Even though the earlier and smaller triangle had false breakouts, it is not unusual for a consolidation pattern to expand or evolve into another pattern. That doesn’t invalidate the current pattern.

Rising to Top of Pattern

Today’s bullish price action shows a continuation of an advance that targets the upper boundary of triangle. Key support would then be around the two moving averages and of course the price they represent will change. A triangle breakout is first indicated on a rise above the most recent swing high of $3,439 and further on a move above $3,451. Both price levels are also prior monthly highs and therefore a monthly breakout will also occur.

Breakout Above $3,439

An initial new high target zone is indicated from around $3,3578 to $3,603 if a bullish breakout is sustained. Given the narrowing of the price range over several months, an upside breakout should be accompanied by a spike in momentum. If not, it could be a warning sign, as seen with the earlier and smaller triangle breakout.

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