Gold Daily chart 7:05AM EDT 10/10/2012
New high; bearish divergence: Gold prices have made a new high for 2012, but barely. (old high: 1790.20, new high: 17905.80). However, there is some reason to believe that the gold market could be entering a consolidation or corrective period. The RSI in the daily chart has a bearish divergence with the price action.
Consolidation scenario, targets: If the market does top off, a conservative target is the 38.2% retracement near 1694.24. Also note the consolidation phase in June through August. If a similar range of consolidation is to develop under the 1795.80 high, then the lower end of this range would be near 1690. We should also treat the psychological handle at 1700 with some respect for possible support.
Not so fast: Yes the market has slowed the pace of the rally as you can see in the 4H chart where price is developing a slightly rising wedge. So far, there is NO topping and if price can bounce off 1760, the rising pattern stays intact, and another upswing would be in the works with the potential to push through 17905.80.
Bearish Signs: A break below 1750 can be a good sign that a top is being completed. The RSI firmly pushing below 30 would add to the bearish case . Then failure for a pullback to reach back above the 1766 area would be a good sign that bears are taking over, especially if the RSI holds under 50.
Breakout-target: In the very short-term, the bearish outlook opens up the 1715.22 support pivot and origin of this rising wedge.
Gold 4H chart 7:15AM EDT 10/10/2012