Gold Closes over $1680, Sets Up Bullish Breakout

By Tom Luongo in Gold and Oil News | January 17, 2013 1:19 |

I’ll make this brief.  If gold closes above $1678.50 tomorrow then that is a bullish 2-bar reversal on the weekly chart which cannot be ignored.  Considering how hard this level is being contested currently by the Exchange Stabilization Fund and others I will say with confidence that this latest downdraft — nearly wholly manufactured by the ESF in my opinion — is over and the bull market in Gold will be back on.

This would be the first two week uptrend since the peak at $1800 after the QEIII announcement.  Moreover, it will be a classic 2 bar reversal with the weekly close above the previous week’s high.  I would feel more comfortable making the breakout call with a close above $1700 but with option pain on GLD being $162 this month and options expiry tomorrow, that probability is low.  GLD closed today at $162.65.  I fully expect an attempt to bring it down to $161.99 tomorrow.

This has been an exceptionally low volatility week so far.  There is a strong possibility of a big move of some form tomorrow up or down because of it.  But at this point the Bundesbank has done the dirty work to give gold bulls a little more spring in their step as no one who is a serious watcher of these markets believes for a second that repatriating 15% of Germany’s gold reserves is nothing more than political appeasement to the libertarians living in Germany who are clamoring for a return to a gold-backed currency.


About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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