If you put gold on a heart-monitoringmachine, it would be pronounced “dead on arrival.” The metal is lullinginvestors to sleep as it churns in a very tight range, narrowing every day.Gold is showing no signs of breaking out unless you consider the tight rangeitself.
When markets go into these typesof consolidation periods, what they are really doing is setting up a very bigmove. We have to assume direction based on the footprint that the pattern isshowing. Coming into this consolidation period, gold was trending lower. Onemight expect the trend lower to continue, which would have been the case,except that the extended consolidation leads us to believe the lows are in andthe next move will be higher.
These questions should beanswered today or tomorrow when the Fed and ECB report. We expect gold to breakout of this range. Based on probability and the pattern, our expectations aregold will break out to the upside and will be long for the announcements. Weare using $1,280 as a level to exit if we are wrong.
By Todd 'Bubba' HorwitzContributing tokitco.com
Follow @Bubba_Trading