The Torture Of Consolidation
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
From a trader’s standpoint, there is no worse pattern than the consolidation or congestion pattern. The pattern stands for the greatest time of uncertainty. The bulls get excited and push markets up to a certain point, and bears show up with new money and sell. The markets make a series of double tops and double bottoms and go nowhere.
Gold is in that exact pattern. It has been consolidating since the beginning of the year. Gold has been stuck between $1,300 and $1,365. Every time it looks like gold is going lower, buyers step in and push it back up. The same holds true for the rallies. They reach the top end and fail -- the torture of congestion.
Within the congestion pattern, gold has made lower highs but still has been able to hold support. However, there are many concerns with this pattern. The weaker dollar has not helped gold, and the weaker markets have not helped gold. The metal will break out to one side or the other. Based on the information we have today, indications are lower first. Of course, this is the torture of congestion.