by Alasdair MacLeod
Gold Money
After a month of consolidation, gold and silver finally broke out on the upside yesterday. In early morning European trade gold was up $38 from last Friday’s close at $1735 and silver up 77 cents at $16.20.
Gold’s move was from a textbook pennant formation and is illustrated in our daily chart below.
[…] Typically, breakouts from pennants are followed by a rapid move, mirroring the move in, telling us to expect a sharp rise in the gold price of up to $250. Pennants are not infallible but given the bullion banks were short before the coronavirus shutdowns in the US and Europe, and all central banks’ subsequent promises to accelerate money-printing, the fundamentals appear to back a far higher gold price as well.
The theory on pennants is that traders who were looking for a breakout or deeper correction before buying now understand they have missed the boat and will look to buy as the price runs away. On the breakout gold and silver’s open interest have increased, which is another confirming signal.