GOLD has been maintaining a Symmetric Triangular range since it dropped from all time high 1900 area down to 1500 level. Money Flow into the safe heaven assets such as Treasury and Gold, keeping it at a strong support level.
This triangular price formation in Gold seems to attribute Sierpinski Sponge like self-similar behavior--triangles within triangles. However, the question remains in which direction this triangle should break.
First let's take a look at GOLD vs. US 10 YR Treasury analogy. As Fed continues to sell short term treasuries and purchase long-terms, demand for short terms continue to rise. This reflects the price of UST 10 YR going higher and the Yield falling below 1.50%. At the same time, banks, investors from troubled European nations as well as China are also purchasing treasuries in order to keep their investments safe. Due to this Flow of Funds into the treasuries, Gold has lost some of its demand and has found a consolidation support at 1500 level. However, there is still hyper physical demand for Gold from China, Russia, India, Turkey and some Mid-Eastern nations that is keeping Gold in strong support zone. According to WGC/IMF, China has imported more Golds, a total of 315 tons, just in the first five months of 2012 alone than all the Gold holding of UK, at 310.30.
So, both high demand for US treasuries and Gold, from the Global Players, keeping treasury yields extremely low and Gold price at a strong support.
Within this scope, if we see further downside in Treasury Yield in the next few weeks, we can expect further cash flow into the treasury and higher price. This could technically mean a price breakout of the Gold Triangular support to the downside. On the other hand, if there is continuous demand for Gold, and the UST 10 YR yield is contained around 1.50% level, the outcome might trigger another phase of Gold Accumulation from Syndicate buyers around the world. As of Jul 3, 2012 CME Gold Long volume for the Money Managers is more than four times higher than short holders. These data also indicate another upside momentum from the previous triangular support zone.
Until there is a clear breakout from this triangle, we might see multi-fractal Sierpinski Triangular attributes withing the larger triangle for another week.
Enjoy the Sierpinski Triangle in this video: