The gold market has simply been stagnant for more than a year now. Prices may be higher year to date but virtually any gold traded at $1,300 per ounce over the last year has seen both sides of the ledger. The trading pattern that’s developing continues to consolidate. The tighter this consolidation becomes, the more explosive its breakout should be. This week’s piece will be short because this is one of those instances when a picture really is worth a thousand words.
Gold and silver have both traded higher since early June. We began noting the commercial traders’ accumulation in the gold market back towards the end of April. As usual, the market had one more move left in it before confirming its bottom. Just as we suggested that retail traders were likely to be forced out by one more flush due to some index selling triggering small stop loss order running. This is the typical capitulation pattern in the futures markets. Gold has rallied more than 7% over the last month and silver has climbed nearly 14% in the same time frame. This rally has pushed the market towards some important technical levels. The question I’ve been asked the most is, “Should I buy the metals, now?”