Gold breakout not confirmed by volume

For those following the gold market, the ultimate question has been whether the current triangular formation will result in a breakout to the upside or the downside. Indeed, the two-month consolidation in gold is very near its end, and we will probably see a breakout by the end of the year (or early January). Considering the recent dollar rally, along with seasonal factors supporting the dollar during the months of December and January, I have been anticipating a breakout to the downside for gold: a drop to $760-$775 would be a great buying opportunity for gold's ultimate ride to $1,000 and beyond. During the past week, however, gold has seen a strong rally from $790 to $830.



Although the triangular formation for Feb. Gold futures (shown above) seems to be intact despite the current rally, other gold charts such as GLD and Gold EOD (shown below) are showing signs of a breakout to the upside. Such breakout to the upside, however, should be dealt with caution. This is mainly because the current rally has not been supported by volume. I would expect a breakout from a two-month consolidation to be confirmed by well-above-normal volume, but this is not the case.





So...with the consolidation near its end, is gold going up or down? I think gold will cool off from its current rally (perhaps we will see positive durable goods and consumer confidence numbers today), and eventually break to the downside during the first week of January when we get an onslaught of economic numbers: manufacturing, FOMC minutes, employment, ECB rate decision. If not, we should see gold shoot above $850...hopefully with some strong volume!