The rally begun on the first trading day of the year remains intact and is especially encouraging because it has yet to correct on the weekly chart. While the absence of a pullback suggests that short-covering is helping to drive gold higher, it would be premature to infer that bulls are confidently in command and unafraid. That would change, however, if this vehicle can push above the 1361.10 peak recorded in November (see inset). The result would be a bullish impulse leg of weekly-chart degree, and it would be more powerful than the somewhat hesitant, failed leg that occurred back in August. For the time being, however, I’d suggest setting a mental alert at 1261.10, since it is above that price where we should begin to see bullish psychology become increasingly robust. If the rally goes still further without correcting, exceeding August’s 1430 peak, that would be even more compelling evidence that this two-month-old rally is the real deal. (Trading note: My immediate downside target is 1324.60, a midpoint pivot that can be bottom-fished cautiously. If it fails, though, brace for more downside to 1312.80.)
