Stuck in a Wedge

Gold has been stuck in a wedge formation for more than a year now. After testing resistance at $1830 early this month, gold is set to end the month at about $1750.

The wedge is visible in the weekly and monthly gold chart. A line can be drawn horizontally at the $1670 level, and another line can be drawn as a downward slope from the peak of $2070. This downward sloping line is currently representing upward resistance around $1830.

With only three months to go for the year, we'll have to see gold break out of its wedge formation this month for it to reach my year end target of $2100. My thesis is that a breakout from the wedge will be followed by a strong move up, which makes the target still within reach. However, even if this doesn't happen, the long term prospect for gold remains rosy. There's a handle forming on the ten year old cup formation visible in the monthly chart.

Once we go to $2100, either by the end of this year or early next year, there's clear sailing all the way up to $3000. That makes the current price level ideal for accumulation. Patience is likely to be rewarded over the next couple of years.

Rococo Cup with handle

By Vincennes Porcelain (France, circa 1739–1756), Francois Binet (France, active 1750-1775, born 1731) - Image: http://collections.lacma.org/sites/default/files/remote_images/piction/ma-31852871-O3.jpg Gallery: http://collections.lacma.org/node/229367 archive copy, Public Domain, Link