Gold Pushes Through Overhead Resistance

Gold appears to have ended its corrective phase that began last September. After some bottoming action, momentum appears to have turned upward in mid-December. It broke out of its “pennant” or rising wedge formation at $1500 and quickly moved through old highs at $1520 and then $1540 today. This should clear the way for an assault on the old highs around $1566 and should allow gold to proceed above $1600. This break out action was confirmed, and led by, a break out in the gold mining shares, which is normal and positive action.

It is unknowable what the final peak for gold will be at the end of this bull phase, or how long this process will take. About all that can be legitimately said is that gold has likely ended its corrective phase, and is back in an advancing phase. Therefore, we would not be surprised if gold challenged prices in the $1650 range over the next several months.
Gold usually goes the opposite of the stock market, but that was not the case in 2019. Gold bullion rose about 18% while the S&P rose about 30%. That gold could rise in the face of such a strong stock market is a little unusual and impressive.

Long term fundamentals remain positive for gold. Central banks continue to be heavy buyers of gold, monetary conditions remain very much in “easy money mode”, with major central banks keeping interest rates low and encouraging loan expansion. China announced new stimulative actions today.

Longer term trends towards outsized budget deficits will continue to intensify with all major nations. They are all caught at roughly the same time in the same vise. They have wildly overpromised social benefits of pensions and healthcare, as the population ages and new births plummet. More money going out, less money coming in, suggests record budget deficits ahead for years to come.

Jan 2020 Gold Chart