After making a bear market low in June, gold rallied about 20%. Then from the August top, price headed back down for a possible retest of the June low.
There is a good chance that the retest will fail, sending bear market prices to lower levels, but there is also a good chance that a double bottom will form, possibly setting the base for a new bull market in gold. Price is currently pushing into the apex of a falling wedge formation. If it breaks up through the top of the wedge, which is the technical expectation, that would be the first step in forming the bullish double bottom.
The weekly chart presents a better perspective of the potential double bottom, but the weekly PMO is falling and has just generated a crossover sell signal.
Another element is the current sentiment on gold. Central Gold Trust (GTU) is a closed-end mutual fund, which means that it trades like a stock on the NYSE. The fund owns only gold -- the metal, not stocks. Closed-end funds trade based upon the bid and ask, without regard to their net asset value (NAV). Because of this, they can trade at a price that is at a premium or discount to their NAV. By tracking the premium or discount we can get an idea of bullish or bearish sentiment regarding gold.
Currently and for several months, GTU has been selling at a substantial discount, so we would say that sentiment is sufficiently bearish for a rally to begin.
Conclusion: The possibility fo a double bottom in gold is just that -- a possibility. The approaching support presents an opportunity for a trend change, so we will be monitoring the situation closely.