Commentary for January 6, 2010

| January 6, 2010

Today both the Gold Currency Index and gold in US dollars broke well above congestion resistance, signaling the likely start of a move back up toward recent all-time highs.

The current uptrend began in early September when the GCI broke out of a large pennant formation and gold quickly followed during the next session. The rally accelerated into a parabolic move in November, before correcting violently in December. With today’s break above congestion resistance, the daily charts are now moderately bullish as both momentum and oscillators have successfully turned higher. Price action will likely continue to rise over the next few weeks and approach those recent long-term highs. As always, we are only talking about possibilities and probabilities, not certainties.

It is interesting to note that while gold broke below uptrend support during the downtrend in December, the GCI never did. Over the years, we have observed many divergences between the GCI and gold, and in nearly every case the GCI has predicted the direction of the next move. We will see if its impressive track record continues as the secular bull market in gold continues to mature.

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Category: Commentary, Market Update


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