Gold's Sideways Pattern Should Resolve Itself to the Upside

The gold market in general, and the pattern that has developed in the streetTRACKS Gold Shares (NYSE: GLD) recently is very interesting because neither the downward correction in equities nor the 10% plunge in crude oil prices since Aug. 1st has negatively impacted the precious metal.

Meanwhile, the dollar is under pressure vs. the Euro, which is sitting near its historical high, and has declined 6% vs. the Yen since late June... which probably deserves some credit for putting a floor under gold prices recently.

Let's have a look at the near term pattern that has developed in the GLD. Before the April high at 68.73, the GLD made a series of higher-highs and higher-lows off of the October 2005 low at 55.55. However, over the better part of the past 4 months, let's notice that the pattern has changed into a series of lower-highs and higher-lows, which is otherwise viewed as a coil or sideways congestion area -- in the aftermath of the larger upleg from 55.5 to 68.73.

Unless the integrity of the coil support line is compromised -- at the 7/26 low at 64.83 -- my pattern work argues that the sideways formation should resolve itself to the upside in a thrust that should challenge and hurdle the April high.