Gold is testing a very important key level. A breakout would be very bullish for the yellow metal. Take a look at the chart below. It shows gold moving sideways for the past four months. These ups and downs created a pattern known as rectangle.
Gold is about to closes above the upper line of the rectangle at 1,428, which is very bullish for the metal. The rectangle indicates indecision from traders. But once there’s a breakout, the price tends to move in the direction of the breakout.[adcode]
Technical analysts use the width of the rectangle to measure the potential move after the breakout. In this case, gold could move $100 because that’s roughly the distance between the higher and lower boundaries of the rectangle.
In the forex market, this is good news for currencies that have a positive correlation with gold, such as the South African rand. That’s one of the reasons I’m buying the rand against the dollar.
My Exotic FX subscribers are already up by more than 20% on the trade. If gold has a decisive break on the upside, the rand will appreciate much more against the dollar.
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