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There's a pattern developing in the December COMEX gold chart that should gladden the hearts of bullish technicians. The Christmas contract's advance has been recently stalled around the $1,060 level, leaving a price history best described as a wedge: daily highs getting lower and lows getting higher. This pattern typically presages a breakout move. Given gold's fundamentals and prevailing trend, that breakout is most likely to be to the upside, perhaps with a near-term objective of $1,088. The gold market's recent action reflects the tug-and-pull of jockeying market participants. Last week, money managers took some profits off the table from the long side, while commercials and swap dealers built record-breaking short positions. COMEX/NYMEX Gold (Dec. '09) 
Money managers really set the gold market's pace. Right now, they're taking a breather, tipping some technical indicators downward. MACD has turned bearish, RSI's weakened, stochastics point south and the last couple of volume spikes have been on down days. Gold's intermediate-term prospects haven't changed really - the break from a lengthy consolidation period still points to an objective above $1,400 for the December contract - but there's some history to consider. Managed money's commitment to gold has reached record levels. On a scale of 0 to 100, based upon funds' net positions, managers, in fact, have been topping out over the past month. Look back a couple of years, though, between fall 2007 and spring 2008, fund-runners kept themselves heavily committed (averaging 94 to 96 on our scale) to gold before prices broke into a $300-an-ounce free fall. Money Managers' Gold Commitments 
So, is gold poised for a major downside break now? Well, no, not really. Sooner or later, though, a breather is going to stretch out into a break. Considering the recent heights attained by the yellow metal and the pileup of assets on the long side, that break's likely to be even bigger than last year's. Better to be forewarned of that so an exit strategy can be realistically planned, don't you think? Options, anyone?
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