Gold has a way of confusing and frustrating investors.
After going nowhere from 2020 to 2023, gold – and its reputation as a store of value – was declared dead.
After all, soaring inflation and government debt levels are supposed to boost gold prices.
During that time span, consumer inflation reached the highest level in 40 years. And federal debt ballooned to over $30 trillion.
Yet gold prices finished 2023 at about the same level they were in the summer of 2020.
But just when investors threw in the towel on gold… the yellow metal staged a historic breakout that sent prices to new all-time highs.
And based on gold’s past moves, there could be a lot left in this one.
Today, let’s take a look at gold’s breakout and see if there’s room for prices to run higher.
Gold’s Big Breakout
Let me tell you something I’ve learned in my 40 years of trading…
By studying a stock or commodity’s historical price patterns, you can learn a lot about how it tends to move.
That can give you an edge in knowing when a big trend is unfolding.
Take a look at the long-term chart of gold, and one pattern should immediately become clear…
Gold goes through long periods of consolidation. That’s where the price just chops around in a range and goes nowhere.
But those consolidation periods eventually give way to a burst of upside. Those gains can be substantial, and uptrends can last for years.
Like when gold started moving to new high ground in 2007. Gold prices went on to ultimately rally 175%, with the uptrend lasting four years.
Now we could be in the early stages of another big move higher. Here’s the latest move in gold that I’m tracking…
|
Free Trading Resources Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out. |
Tracking Another Move Higher
Gold started testing new high ground late last year around the $2,000 level.
That followed another long trading range from the middle of 2020 to late 2023.
With a new long-term breakout taking place, now’s the time to track gold’s uptrend and look for trading opportunities.
One of those opportunities recently emerged, and it could set the stage for gold to make new highs.
Let’s zoom in and look at the daily chart below…
First, look at the price action happening earlier this year at point 1.
The dashed trend lines show how gold prices were coiling ahead of a big move. As prices traded inside that pattern, the Relative Strength Index (RSI) in the bottom panel mostly held over 40.
That’s a sign of price strength during the sideways trading action.
From there, gold prices launched higher out of the pattern until topping out around $2,400 an ounce in April.
Gold prices started consolidating again at point 2.
But take a closer look at the price action. Price was coiling again, as shown with the dashed lines. And the RSI held above 40 even as gold prices bounced around.
You’ll also notice that gold tested the $2,300 level as support a few times.
On the most recent test at the end of June, the RSI made a slightly higher low. That’s a positive divergence, which signals improving price momentum.
From there, gold prices are rallying over the resistance line and are now testing the high end of the recent trading range.
Moving above the $2,400 level signals that the next leg in gold’s rally is underway.
Good trading,
Larry Benedict
Editor, Trading With Larry Benedict