Price and volume action in gold in recent weeks has been very bullish indeed, as it moves towards completion of its giant 4-year long Head-and-Shoulders base pattern. We can see this to advantage on gold’s 10-year chart shown below. The volume pattern and volume indicators give the game away, and confirm that this is a genuine base pattern that will lead to a major new bullmarket in gold. Observe the volume build on the strong rise out of the lows of the “Head” of the pattern early last year, and how its even stronger on the rise this year out of the Right Shoulder low, and especially on the rally of recent weeks – the Accumulation - Distribution line has already reached its bullmarket highs of 2011, which is clearly a very positive sign. The new bullmarket hasn’t officially started yet of course and won’t until the price breaks out of the base pattern by breaking above the 1st band of resistance shown on the chart. That means that the days left to accumulate investments in this sector at good prices are numbered.
About a week ago it looked like gold was going to roll over again and play dead as it had arrived at an important zone of resistance at its April and June peaks as we can see on its year-to-date chart, with the risk of its doing so being increased by the potential for a dollar rebound, which we will come to later, but it didn’t – instead it broke above this resistance to advance on strong volume, which drove volume indicators sharply higher, a bullish development. This has given gold a buffer to buttress it in the event of a near-term dollar bounce.