Will Gold Price Wake Up?

New York (June 13)  If you put gold on a heart-monitoring machine, it would be pronounced “dead on arrival.” The metal is lulling investors to sleep as it churns in a very tight range, narrowing every day. Gold is showing no signs of breaking out unless you consider the tight range itself.

When markets go into these types of consolidation periods, what they are really doing is setting up a very big move. We have to assume direction based on the footprint that the pattern is showing. Coming into this consolidation period, gold was trending lower. One might expect the trend lower to continue, which would have been the case, except that the extended consolidation leads us to believe the lows are in and the next move will be higher.

These questions should be answered today or tomorrow when the Fed and ECB report. We expect gold to break out of this range. Based on probability and the pattern, our expectations are gold will break out to the upside and will be long for the announcements. We are using $1,280 as a level to exit if we are wrong.