Following in the footsteps of Silver, Gold broke through a key resistance level, clearing and closing above the $1630 level which had not seen a daily close above it since the 1st week in may. The breakout also came on the heels of some pre-breakout tension or pressure which led to a strong breakout bar and good close towards the high, suggesting little profit-taking.
I suspect there will be new technical models now buying the shiny metal and looking to add longs on a breakout pullback setup towards $1630 should it offer the dip. What is interesting to note is how this breakout preceded the Bernanke Jackson Hole speech next week whereby the market is waiting to hear if Helicopter Ben announces his plans to print more money.
Perhaps the breakout was a sign of strength ahead of the meeting regardless of whether he hits the CTRL+P button or not, which is good for the underlying strength of this breakout. But, it may also mean that if he disappoints (as I'm expecting him to) that the precious metals will sell-off a bit offering a good pullback to get back in long on the cheap, so plenty of options to take a position over the next few days.
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Global Market Commentary:
After what seemed like and over-extended rally running on fumes in terms of volume, US indices fell broadly, likely from profit taking with the indices coming to multi-year highs. Although they started off up on the day, they all fell heavily for most of the trading day, many of them creating small reversal patterns on the daily charts.
Meanwhile, the ECB put out some more hopium that it will start buying Spanish and Italian bonds through Eurobonds or other possible methods, reducing risk in the zone and thus being a risk on day. The Euro thus gained vs. the USD ahead of the Samaras meeting with the European heads of state expecting to ask for an extension (not the first time) on their repayment schedule.
The Euro on the day closed up at 1.2465 while Gold and Silver rallied to several month highs along with Oil making gains on the day.
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