I’ve been tracking gold closely for over a decade, like a lot of people, I had to come to terms with how fragile the economic system really is. I vividly recall June 2013 when I opened my first trading account. At that point, gold was breaking below its 200 moving average on the weekly. That marked the beginning of a long sideways period that, in my view, was a multi-year opportunity to build positions patiently. Something I enjoyed doing while many wondered why I was even paying attention to the pet rock. What's the point of mentioning this you ask? Because, while this was the biggest opportunity, and has been the biggest run in quite some time in the space, there has been virtual radio silence on the subject until recently.
Between April 2013 and July 2019, gold mostly drifted in a range. Then came the breakout to fresh highs in August 2020. After that surge, the metal consolidated again, eventually bottoming in October 2022. From there, the rally picked up steam, and it’s carried us all the way to where we are now.
Looking at the bigger picture, I see a pretty clear cup-and-handle pattern unfolding:
- The left side of the cup formed between August 2011 and late 2015 or early 2016.
- The right side ran from early 2016 through July 2020.
- The handle was the decline from mid-2020 into late 2022.
The breakout began in January 2024.
Back in late 2015, gold bottomed around $1,045 an ounce. Today, we’re up around $3,336, which is an extraordinary run by any measure.
For anyone wondering whether the moves in precious metals equities can match or even exceed the metal itself, consider this. GDXJ, the junior gold miner ETF, traded as low as $17.66 in early 2016. As of now, it’s sitting around $68.44, which is a gain of roughly 287 percent from those lows. Hecla Mining (HL), a well-known silver producer, bottomed near $1.58 back in 2015. It eventually ran all the way to $9.06 at the highs in 2021 before pulling back to around $6.07 today. Moves like these are a good reminder of how powerful the swings can be in this sector, both up and down.
While I’m still a long-term bull on gold, I think the near-term setup looks due for a correction. This latest move higher has been so aggressive that a pullback wouldn’t surprise me at all. Add to that the fact that now, as opposed to before, every one is a monetary policy expert and hot on the trail of the "fiscal insanity" going on in Washington etc. I'm seeing countless mainstream articles discussing how central banks have been on a buying spree, governments are in shaky fiscal positions, etc. It's just too good to be true. I keep hearing Stanley Kroll's references to how the news follows the price in my head and is often late to the funeral.
A few things stand out to me:
- Price is stretched well above the 50-day moving average, which is sitting near $2,875.
- The 200-day moving average is way down around $2,173.
- A regression trend shows gold pressing into the upper band, suggesting momentum is pretty extended.
If we do get a retracement, I’m watching two key Fibonacci levels, measured from the September 2023 lows to recent highs:
- The 38.2% retracement sits near $2,750.
- The 50% retracement comes in around $2,575.
I expect these areas could attract quite a bit of buying interest. If price starts dropping into that range, traders who were betting against gold will likely take profits, and long-term buyers could start stepping back in.
For the next 9 to 12 months, I’m thinking the bears should gain control, leading to a 20 to 25 percent correction off the highs. If gold were to pull all the way back to the 200-day moving average, that would be closer to a 35 percent drawdown.
Personally, I’m carrying some short exposure here. For my long-term positions, especially in miners or ETFs I may not want to liquidate for tax reasons, so with the right ones I’m holding steady and planning to add selectively if we see deeper retracements.
Stay sharp out there.
Disclaimer:
Nothing in this post is financial advice, trading advice, or any other kind of professional advice. I am not a financial advisor, certified analyst, or mystical oracle. I am just a regular person who trades for personal amusement and occasionally talks to my computer screen. If you take trading cues from someone who works in the car business and posts charts on the internet, you might want to reflect on your life choices and consider consulting an actual licensed professional before risking any money. Investing involves risk, including the risk of losing your entire investment and then some, plus your sanity. Always do your own research, use your own brain, and don’t blame me if your account balance ends up looking like a deflated balloon.
Stay rational and trade responsibly.
