Gold’s False Breakout — Continued Weakness to Come?

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The surge above $1,265 for gold in the wake of the US retaliation against Syria, yet its failure to hold this level by Friday’s close, constitutes a “false breakout” in our technical work. False breakouts occur when an important resistance level is breached momentarily, but then buyers nearly disappear and new sellers show up, causing a reversal bar on the daily price chart.

False breakouts (or their inverse false breakdowns) tend to mark at least short-term reversals. However, the degree and length of the reversal cannot be determined simply from the single day of price action. It would be a mistake to think that all false breakouts portend major trend reversals. Perspective is key.

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