Gold closed moderately higher today, reacting further off of support at the lower boundary of the uptrend from May. As expected in October, the overbought correction from early last month retraced to uptrend support and the strength of the rebound during the last four sessions favors a return to previous highs of the advance.
Our Gold Currency Index (NYSE:GCI), which tracks the intrinsic value of gold as an international currency, has also reacted strongly off of uptrend support, suggesting that a return to previous highs of the rally is likely.
The consolidation formation on the weekly chart that we have been monitoring since early September continues to track the bullish scenario that we outlined at the time, favoring an eventual resumption of the long-term uptrend. Last week, we noted that gold would need to hold at or above congestion support in the 1,660 area in order for the formation to retain its bullish character and the pronounced rebound thus far this week is a sign of persistent strength.
The weekly close could provide a meaningful signal with respect to long-term direction, so it will be important to monitor gold closely tomorrow for a potentially bullish development.
We will identify the key developments as they occur in our daily market forecasts and signal notifications available to subscribers.
Disclosure: I am long SGOL.