Gold bulls take a breather; Tight range favours breakout traders

Gold has hesitated below $1330 and hovers around 11-week highs, awaiting further direction. The tight ranges offer potential breakout traders to 'set and forget'.

Gold hovers around current levels, finding resistance below the trendline from Sep '12. The $1240 low is a potential RS (Right Shoulder) of an inverted H&S pattern, however keep in mind these patterns can take a long time to complete and have a tendency to morph over time into more complex patterns. Therefor it is only a rough guide to potential future direction and price target (which incidentally would be around $1600 if we were to see direct gains from here).

An alternative scenario, and one I find more likely, is the weekly chart is going to continue to oscillate between $1180 and $1425 and 'coil' up into a complicated triangle until an eventual breakout occurs, north or south. One issue to consider is over the coming month/s I expect to be an avid USD bull which itself could make Gold heavier to help produce these complex patterns.

There is only one thing for certain right now - the weekly chart isn't trending.

Following yesterday's flight to safety' the markets favoured USD and Bonds, the fact that Gold has not budged from recent highs is a testament to its strength. But then this too is also a safe haven. If USD continues to remain strong amid tension in Iraq we may experience frustratingly choppy prices on Gold around the bearish trendline as investors put money into both USD and Gold.

In the event tensions are eased then we can expect Gold to respect the bearish trendline and gravitate towards $1300. A break below $1300 Targets $1285 and $1270.

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