The gold price has been wallowing around $1,050 to $1,180 since June 2013, sending plenty of confusing signals as it built a very broad consolidation base.
Now, the rally in gold has the potential to develop into a breakout from the consolidation base and become a new uptrend. But the strength and sustainability of the gold rally is still not unclear.
The first step in analysis is to put the rally activity into context by using a weekly chart. The downtrend is well defined by the Guppy Multiple Moving Average (GMMA) indicator. The long-term group of averages are well separated and have not developed any compression in response to the recent rally.
Gold has a very strong resistance band between $1,150 and $1,180 so any new trend breakout requires a sustained move above $1180 and a compression in the long term GMMA averages, to show that investors have become buyers. These are the two conditions investors watch for; until they are established the price movement remains a rally and traders are ready to go short.