Yesterday it was Silver that broke out of its congestion zone and began a new leg higher. Today it is Gold which has finally managed to clear the top of the congestion zone that had marked its trading pattern over the last few weeks. Volume on the breakout is strong.
The breakout also set a brand new all time high for the yellow metal in the process.
We are going to be encountering rollover pressure as speculative longs begin moving out of the April contract prior to its delivery period next week and into the June contract. Rollover periods are a very good time to gauge the strength of a move higher as it gives longs an excuse to either book profits or reinstate expiring long positions in the next active month contract. If the hedge funds in particular choose to simply rollover with a minimal amount of profit taking in the April, that will be quite positive for further gains in Gold as we move through the month of April.
Based on the extent of the congestion zone and the subsequent breakout, a technical price target for this move in gold is near $1490.
We should expect to see buying support under the market first at the breakout point naer $1440, followed by $1435 and then $1420. I would prefer not to see any move below $1420 of any duration if this leg is going to yield a strong advance higher.
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