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The GCI Breaks OutErik McCurdy Editor's note: The Gold Currency Index (GCI) was created by Prometheus Market Insight in order to track the true, intrinsic value of gold as an international currency itself. This tracking index is a composite of gold prices in the currencies of 10 of the largest economies in the world as defined by GDP. The GCI has been forming an ascending triangle since the most recent long-term high in late January, and today (2/20) it broke above resistance at the upper boundary of that consolidation formation:  An ascending triangle is one of the most bullish consolidation patterns known as it usually results in a continuation of the previous uptrend. Technical indicators such as momentum and oscillators have repaired themselves and would readily support a subsequent move to much higher levels from here. Gold in US dollar terms has also broken above resistance at the upper boundary of its pennant formation, although it has yet to make a meaningful new high:  The fact that the GCI ascending triangle has been stronger than the corresponding gold pennant formation is a bullish sign, as positive divergences between the two have nearly always been followed by additional gains. Outlook As always, there are no certainties in the markets, merely possible scenarios and probabilities. However, the GCI breakout to new all-time highs coupled with the strength of the preceding ascending triangle formation strongly suggests that price action is heading materially higher from here. Moving forward, it will be important for price action to confirm the breakout with additional gains during subsequent sessions. If we get that necessary follow through, gold will very likely be on its way to $1,000 over the near term. Feb 20, 2008 Daily GCI updates are provided at Prometheus Market Insight. 321gold Ltd |
