Third time’s a charm

20/06/2010 by Philinje.

Wow. Gold broke $1250 for the third time (well, there were basically three major attempts in recent months) and closed above $1250 for the week. Pretty auspicious.

It’s clear that $1250 has acted as the major resistance level in this move to new all-time highs, not the former all-time high of $1234 or so last December. And often, it takes three tries at least to break through major resistance. Until Friday. there was the distinct possibility of the chart looking like it had a double top at $1250.

The gold stocks surged on Thursday and Friday, kind of like the good old days when they would make 2 to 3% moves a couple days in a row, acting as the lead on a bull run. It’s been a while since that’s happened. The gold stocks, like silver, have been half asleep as gold has marched higher, causing many to wonder if the gold stocks and silver were signaling a non-confirmation.

We’re not out the woods yet, but close. If gold stays above $1250 (maybe dipping down to $1240 or so but moving quickly back up), then the technical signs will be ALL GREEN. That means a lot of traders will pile in, and short covering may cause a parabolic spike.

With global tensions as they are, we might see some fireworks this week. The reason I want to see $1350 is not because of the potential profit, but because that will signal the confirmation of a target, and that means a conservative approach is to step aside, at least in part.

The conservative part of my nature is why I like gold, but that part of me doesn’t like the escalating risk in global markets. While gold could melt up as everything else melts down, I am just not confident of that. So my preference is to see the $1350 target sooner rather than later and reduce risk in every possible way.

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