About 10 days ago gold blasted strongly above resistance at $428 in the vicinity of its falling 50-day moving average. Because there was so much resistance at this point this move was considered unlikely, and its occurrence was - and is - regarded as a bullish development, and the price action since then is not expected to lead to renewed decline.

The dollar's countertrend rally, which ran from late December through early February is believed to be over. This rally stalled out at a resistance level at 85 on the index, and the following decline cut through some important support, triggering breakouts by both gold and silver. The entire formation that has developed this year looks like a "Head-and-Shoulders" top, and if it is, a break of 82 can be expected to usher in a sizeable decline that will take it to new lows. If this interpretation proves to be correct, then gold is likely to find support in the vicinity of its flattening 50-day moving average, i.e. around the current level, and then push on higher to challenge the highs of early December, at which time the moving averages will be in bullish alignment, increasing the probability of a break to new highs.

The action over the past week or so is viewed as necessary consolidation, following the sharp advance from the early February low, and makes possible further significant gains.