Gold’s Most Bullish Setup in 50 Years
Gold is at a very important juncture in its history. It has formed a bullish cup and handle pattern and a now 12-year-long base. Cup and handle patterns are among technical analysis's most reliably bullish patterns. Furthermore, multi-decade-long bases tend to give way to multi-year and multi-decade rises. The setup is in place for a very exciting Gold market over the years and decades ahead. In past lessons, I explained the importance of Intermarket analysis for Gold and the entire precious metals sector.
Gold must outperform the stock market and other asset classes to be in a secular bull market. In recent years Gold has trended higher but not outperformed the stock market, and as a result, the precious metals sector (the mining stocks and Silver especially) has remained in a secular bear market.
This cup and handle pattern is stronger than typical because the right side of the cup, having reached ~$2050/oz, is higher than the left side, the 2011 peak of $1920/oz. Also, the handle, for other than a few weeks, has consolidated above its 38% retracement in the upper $1600s. The measured upside target is around $3,000/oz, while the log target is approximately $4,000/oz.
To summarize this lesson, Gold remains in a super-bullish base and cup and handle pattern that will lead to an explosive upside move once Gold outperforms the stock market and conventional 60/40 portfolio. The inevitable breakout for Gold may require another 12 to 18 months to occur, which in terms of time, would match the length of the bases in the S&P 500 from 1937 to 1950, 1968 to 1981, and 2000 to 2013, and the base in the Hang Seng (Hong Kong) from 1973 to 1986.
It is essential to understand that while the breakout will have super bullish implications for Gold in the first few years that follow, it will mark the start of a new secular bull market in Gold. Breakouts from these long bases lead to advances that last at least a decade.