Breakout move in gold and silver?
Is this finally the break out move gold has been waiting for? In order to convince the broader market that it is ready to make steady gains from its consolidation over the last four months, gold first needs a close today above $1,630 (it looks like this will be achieved). Above there it must convincingly break the 200 day moving average at $1,643, a level it hasn’t traded above since the end of March, in order to project into a new trading range.
In the overnight session, the yellow metal was able to catch bids on the back of two headlines. First, China hinted that fresh economic stimulus could be on the horizon in the second half of the year. Second, the USD began to materially weaken against the euro as rumors circulated that the European Central bank would step up efforts to aid peripheral euro-zone economies. Considering that gold had pressured the $1,630 area fifteen times in the last three months, these two developments proved to be enough to finally allow the yellow metal to trigger stops and break above $1,630. There was even a 7,000 lot (700,000 toz) buy sweep on the Comex electronic system that caused gold to spike to $1,638 from $1,630 in a matter of seconds. While today’s move is encouraging, gold bugs should be cognizant of the fact that the move higher is happening on what is still considered lackluster overall volume.
