Gold has maintained much of its strength on the general rally that has been in place since the beginning of the year. This rally has brought gold off its three-year low of 1178 at the very end of 2013 up to a high of 1332 earlier this week, for a full 13% advance, before pulling back slightly. The noted end-of-year low at 1178 formed a double-bottom pattern with the previous major low at 1180 in June of 2013. Just last week, the precious metal advanced further off that double-bottom to breakout above its key 200-day moving average – a situation that has not occurred for an entire year since February 2013.
Positive Signs
Despite a slight pullback in the rally, gold is showing signs of maintaining its recent strength on what can currently be labeled an upside correction, and is now just short of a key downtrend line that extends back to the October 2012 high near 1800. A breakout above that trend line would create the potential for a break of the long-term downtrend, with further major resistance then residing around the 1425 level. A major downside support level on any further pullback in the rally continues to reside around the 1265 price area.
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