The gold market has been very perplexing lately. It broke out of a 4 month wedge formation and rallied about 80 dollars before topping out just above 1300. The breakout occured not because of a weak stock market but because of a nervous global market.
When the Swiss National Bank took drastic, unscheduled action on their currency it sent the gold market on a strong 3 day rally. Since that rally the market stalled and pulled back just about 80 dollars off the high. If you take a look at the last pullback, it retraced 71 dollars off the high and took 16 trading sessions to end.
As this is being written the market is 13 days into the current pullback. The market is also right along the 100 period moving average, the first pullback to a significant moving average has a tendency to act as strong support. If gold is going to stay strong and make a run towards the highs, then 1225 will have to hold. As long as the market does not close below that level, I would remain bullish. If the market does rally the target on the upside I would focus on is 1350. This is a position that can be traded with futures or options depending on your risk tolerance.
