Neckline is holding

09/02/2010 by Philinje.

Just a quick note that while the brief rally ended quite suddenly last week, the decline seems to have gone to the bottom of an A-B-C wave pattern (in many things, not just gold) as of Friday. We are seeing a muted consolidation now.

Most importantly, the neckline for gold was hit and has held. This could be the bottom before a peak in April. If gold goes lower than $1040 in a convincing manner, that theory is invalid.

See Art’s latest chart:

Art’s latest chart - we hit the neckline

Active traders could play this prudently. Or if you were considering selling some long-term holdings, you migt want to see what happens over the next few weeks, into early March.

I give this about 50-50 chances now because there are reasons the dollar could be weak in the near future. Basically, the robustness of the US economic recovery has been called into question to some degree by recent data. That means the likelihood of a rate hike in the near future have receded.

As we’ve seen over the past three weeks, risk aversion can hit suddenly and with great effect. So be careful.

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