Veteran gold traders can attest that piling onto breakouts, especially in highly leveraged futures, can quickly become a losing proposition on a reversal.  While yesterday’s surge in gold was confirmed with gold priced in other currencies (especially impressive with the confirming moves in the commodity currencies of the CAD and AUD):

…there is a slight seasonal negative at work here until the end of October:

Traders should recall that the second week of October 2008 began a painful slide after a strong September.  The forced deleveraging from all instruments on margin call mania exacerbated the move last year, to be sure.  But it seems prudent to wait for a move back to the 1025 to 1031 area (basis Dec 09 contract), which is the 61.8% to 50% retracement box from the breakout of last week’s highs at the 1011 area.   Gold could even retrace to the 1010 (61.8% off 985.50 low) with the medium term bullish trend in tact.

In our opinion, better to be careful and potentially miss a move than to get caught up in the euphoria of a market that has burned many short term leveraged traders.