Gold: Watch This Wedge

With technical indicators such as the MACD, STO and RSI fairly neutral, gold is at a crossroads. The chart below shows how gold prices are in a large wedge formation, going back a good six months.

This wedge formation is what we will be watching very closely over the next few trading sessions for signs of a breakout. As of yet we are not totally sure which way gold will go. Our gut says up and out, but there is a possibility that we could see a sharp drop down before gold embarks on a massive rally over the next few months.

If gold breaks up and out of this wedge formation, it will certainly be a very bullish sign, however the real hurdle lies just above $1000. Sure, a break up and out will produce a fifty dollar rally and maybe a 20% gain in gold stocks which is all well and good, but the for the real substantial gains to be made gold prices need to make a new all time high. When this happens we think that gold prices will swiftly move to $1200, en route to $1500 and then $2000. (more)