Gold – Is the Hibernation over for the Bears?

It would appear that the past few weeks have been a gentle hibernation period for the gold bears. It generally isn’t until the season warms up that they pop out from their hiding places, to steal a few picnic baskets, and possibly bite Ranger Smith. Just like the cartoon character, Yogi Bear, real life gold bears are awakening from their slumber and looking for their next picnic basket haul to plunder.

Gold has been consolidating over the past ten days with its price action constrained by a wedge pattern that is strongly evident on the H4 chart. Despite increased economic uncertainty, and geopolitical risk in Yemen, gold really hasn’t benefited from much in the way of a strong trend and continues to languish sideways looking for the break out point that is sure to come.

Just like a picnic basket that is full of scrumptious snacks that a bear can feast on, gold’s wedge pattern is just waiting to have its lid lifted and the contents gorged upon. The pressure is building and a downside break for gold is a real possibility as gold bears realise that little exists in the way of support until the $1,143.00 range.

Today represents gold’s first real test, on the downside, for over two weeks as price responded to bearish pressure and fell to $1,188.55. The moving averages tell the story with the 6EMA crossing over the 12EMA and both lines heading lower, as price found some support at $1,188.55. RSI remains in neutral territory despite breaking through its wedge pattern, but reveals a bearish trend. MACD reveals further bearish sentiment as it crosses below its signal and “0” line, indicating further downside action may be in play.

Ultimately, wedge breakouts are difficult to predict but the evidence suggests that gold is likely to be under bearish pressure in the coming days. The unknown variable is likely to be Greece in the coming weeks and whether the risk of a sovereign default causes capital to seek a safe harbour.

Finally, it leaves us with the question of whether you are Yogi Bear, seeking your next picnic basket caper, or the venerable Ranger Smith protecting vulnerable picnic goers. I know which camp I fall into…