Gold/USD or XAU/USD has formed a large Ax / Pennant formation on the Daily, Weekly & Monthly charts.With each time frame we step up, the formation becomes more visible until you reach the Monthly where it sticks out like cruise ship in the Sahara. Price has been making lower highs and more or less level lows since August 2011 when it peaked at 1826.80. The pair has since been unable to close below 1550, which should be no surprise since most economists and trader alike feel it is grossly under valued. Some reports indicate that if Gold were to inflate at the same rate as other commodities, and especially against the USD Greenback, it should be sitting somewhere around $8000 or more per ounce. The pattern on the charts indicates that a very strong breakout is coming, and it looks far more Bullish than Bearish. Key support for the pair is the 1500 level with 1550 and 1600 taking up positions as strong support as well. The main resistance levels are 1650, 1700 and 1750 with the all time high being the real deal to beat. I am largely Bullish on the pair, but feel it is possible there will be a fake out to the downside before the big move up happens. This is pretty common as some of the market movers often push markets lower in order to buy at better prices before hopping the Bull Train. I can't say when this breakout will happen, but the ranges can't get much tighter with last months range only about 900 +/- pips. I will be watching for a bullish entry at the 1500 level or below in the days and weeks to come.
Happy Trading!