Current Gold Price Pattern Suggests a Breakout is Coming

While historical price patterns aren’t always an accurate indicator of directional fortune telling, it could be a potential sign that gold could be in for another breakout.

The precious metal’s rise has been in tandem with a strong stock market as the S&P 500 has been touching new highs in the first quarter of 2024. Likewise, gold hit an all-time closing high of $2,230 in the first quarter as mentioned by a Sprott Precious Metals report.

The report highlighted a bullish gold chart progression in the past decade, noting that after a three-year consolidation breakout in 2016-2019, gold surged in August 2020. The precious metal then went into another three-year price consolidation pattern before hitting new highs again in March.

“Past extended bullish gold trends typically follow this pattern (although due to different causes): higher price thrust, consolidation and thrust,” the report noted. “We believe several fundamental factors are in place for gold to potentially go higher, which we highlight in Figure 1 (below).”

Figure 1. Gold Bullion’s Technical Breakout (2014-2024)

Figure 1. Gold Bullion Technical Breakout Targets $2,400 to $2,500 (2014-2024)

Source: Bloomberg. Data as of 3/31/2024. Included for illustrative purposes only. Past performance is no guarantee of future results.

The report also cited central bank buying as another catalyst that’s been pushing gold prices higher. The reasons were explained in a 2023 report highlighting the central bank buying spree.

“We have identified several reasons for central bank gold purchases over the past months,” that report said. “These include the need to diversify reserves due to sanctions risk, the poor performance of sovereign bonds in the face of high inflation, a desire for outside money and the de-dollarization process.”

Get Gold Exposure 2 Ways

If a breakout takes place, it’s an ideal time to get gold exposure. Sprott has a pair of funds where investors can benefit from the metal directly or indirectly via miners.

Investors looking to add exposure to gold bullion should consider using the Sprott Physical Gold Trust (PHYS), which is a fund that provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange.

An alternate play on the metal’s prices via ancillary gold services like mining offers opportunities in the Sprott Gold Miners ETF (SGDM). The ETF seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of large gold companies found on Canadian and major U.S. exchanges.

For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.