Two weeks ago, we wrote about how the price of gold was gearing up for an August rally based on, amongst other reasons, an encouraging move in which price had ‘bounced’ and held above the 50 Day Moving Average trendline. Sure enough, this week saw that bounce play out with price rising to over $1670. Friday’s action resulted in a Doji candlestick in which the price stretched both upwards and downwards but ended up closing close to the day’s open. That can indicate uncertainty in the market and next week will show us whether the bull’s still have it or whether the bears will force a pullback. Nevertheless, when we switch to the longer-term picture and examine the weekly charts, their is strong indication that momentum is now skywards. Firstly, a MACD cross-over which is a bullish sign is clearly visible and secondly, price has surmounted the 50 Day Weekly Moving Average trendline which one might have expected to act as initial resistance. Even if there is a pullback next week, we would hope to see this trendline holding (currently at $1658) and the gold price once again ‘bouncing off it’.

David Nichols of the FractalGoldReport states that “Wednesday’s move up in gold was huge. Not so much in terms of points gained — although it was a pretty chunky rally — but more in terms of context.

There is lower risk now that this is a false breakout, which could have led to a very quick collapse back down. There is always risk at critical breakouts, of course, and even though I didn’t see much of a problem with this set-up, you can just never be 100% certain that the opposite energy won’t come flooding in to tank a good-looking breakout move.

There is a monstrous amount of energy available to power a potential massive trend in gold. This is an ideal set-up for a move up to the next 21-month peak, scheduled to arrive in June or July 2013.”