Triangulation Action in Gold

Dec 7, 2007: 12:43 PM CST

Gold prices appear to be in the middle of forming a consolidation pattern that resembles a standard triangle pattern.

This seems reasonable, given the immense run-up in gold prices following September (there was a minor triangle pattern – not shown – that preceded the recent large volatility move).

Triangles are “pause” patterns that represent consolidation in price and are NOT always continuation patterns, though in a majority of cases, they tend to be so.

Let’s look at the daily chart:

We see momentum also consolidating (bottom pane indicator) and forming a narrow range and consolidated swings. The bottom pane indicator is designed to highlight price swings more effectively.

Nevertheless, whether the triangle pattern resolves in an upside or downside break is yet to be determined, but we can be sure that after large price moves (trends), price can be expected to consolidate or digest the gains. This is consistent with the price principle that Price Alternates between periods of Range Contraction and Range Expansion.

Keep an eye on this commodity due to inter-market relationships. It’s an interesting pattern nonetheless.

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