Gold continues to churn like the mouse on the wheel, running very fast only to end up in the same place that it started. For the past couple of months, that has been the story — run fast but go nowhere.
There are many signs pointing to a possible gold breakout to the upside, the biggest being the ratio to the S&P. The S&P has been outperforming the metals by a large margin and appears to be stretched to unsustainable levels.
Typically, when this type of pattern occurs, and the rubber band has been stretched, we can expect a spring back to the mean. Certainly, there is no guaranty that the ratio will narrow, and gold will rally, but based purely on the math, the probabilities are high.
As long as gold can hold the $1,190 level, our expectations are a big rally is coming and gold will break out to the upside. The first resistance level to watch is $1,220.
By Todd ‘Bubba’ Horwitz
Contributing to kitco.com
Contact Bubba@bubbatrading.com
www.bubbatrading.com/
