Gold Weekly Chart Descending Triangle 65-Week MA

Keystone always preaches about the 65-week MA for gold, a key level to watch, and yesterday's print shows why. The 65 is like Mom's home cookin'. No matter how long you are away, you always return home for a great meal. Gold price may venture away from the 65-week MA, for even two or more years at a time, but price always comes back to the 65-week MA, think of it as a long term magnet line.  Price had spent a couple years above the 65 and after a quick intraweek test in December, finally fell thru in early May this year. Price continues the struggle with this vital S/R level and yesterday's close is exactly on top of the 65-week MA at 1659. Watch this closely, obviously if you are a gold bull you need price to move above 1659 and stay there. If a gold bear, you want price to collapse from here.

The other drama with gold is the descending triangle we have been discussing here for a half-year now. The descending triangle in blue is textbook and a collapse seemed inevitable, but, once Chairman Bernanke and Draghi started talking stimulus in July, booiiiinnng, gold explodes upwards (stimulus drives the dollar lower and gold higher), stopping the triangle failure at 1575 and driving price up to the current levels. Note how price has now morphed into a new descending triangle shown in red.  The confluence of the top trend line and the 65-week MA, and price, all now at 1660-ish, is the set up for the climax that is about to occur. Gold bulls win above 1660. The sideways malaise and indecision continues thru 1575-1660. Gold bears win if price collapses thru 1575 since the downside target for the descending triangle pattern would be in the 1200's, or lower. The importance of the triangle base line support across 1575 cannot be underestimated; if 1575 gives way, gold is lost.

Note the neon green lines that show a long and strong profile remaining, although the RSI and histogram have already seen enough with higher prices and now want price to fall. This behavior should set up some stutter step action sideways and then the expectation would be that price stays inside the triangle possibly setting up the failure at 1575. For the very near term, today, watch the 65-week MA as a direct guide on the price action forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

Note Added 8/31/12 at 9:15 AM:  Gold closed yesterday at 1659 and the 65-week MA is 1659, the drama continues.