Gold is set to soar
Alasdair Macleod
Technical analysis alone points to gold rising rapidly to at least $4300 by year-end.
No wonder platinum, copper, palladium, and silver are front-running gold.
Gold continued its three-month consolidation this week, while silver outperformed.
In European morning trade gold was $3348, unchanged from last Friday’s close.
And silver was $38.85, up 70 cents on the week.
Our headline chart shows silver now outpacing gold so far this year, up 35% and gold up 28%.
Weaking gold since Tuesday’s peak at $3431 has been the impending expiry of the Comex August contract, with last trade for call options on Monday next week.
Gold appears to be nearing the apex of a pennant pattern formation, illustrated next:
This pennant’s shape is immensely bullish.
Its flat top and rising bottom reflect a strong fundamental bull which will resolve itself on the upside.
Typically, a pennant is a pause in a powerful underlying price direction before its resumption.
And when it breaks out of it ($3437) the subsequent move is swift.
Edwards & Magee (the definitive work on Dow Theory) describes a pennant as “These pretty little patterns of consolidation are justly regarded as among the most dependable of chart formations both as to directional and measuring indications”.
And “They are half-mast patterns which ordinarily form after a fairly steady and rapid steep price movement”.
Based on this analysis, the minimum price target for gold becomes $4,340, and fairly quickly at that taking about five months, i.e. by the year-end based on the extent and time taken for the move into the pennant from mid-November 2024.
To say the least, the implications are very interesting.
From a market perspective, if gold does perform as one of “the most dependable of chart formations both as to directional and measuring indications” indicates, one is left wondering what the market consequences are for the other metals, both precious and base.
Look at this Finwiz chart below:
Besides commodity prices measured in declining dollars being generally tilted to the upside, the highest rises are in metals prices: platinum, copper, palladium, silver, and gold.
Gold is the least performing of these metals rising only 23% on the chart’s numbers (actually 28% and silver 35%).
If gold is targeting a minimum of $4340 in five months it suggests that these other metals are similarly mispriced, potentially more so the way they are jumping the gun.
Copper’s rise can be partially explained by Trump’s tariff policies, which are currently threats rather than eventual outcomes.
But a paper-driven crisis in one or more of these metals due to derivative leverages entering a delivery shortage becomes a real danger.
But of these metals, silver must be our focus.
Silver’s performance illustrates a catch up from severe under-pricing, which other than a few speculative episodes is decades old.
For much of the time, while demand for silver for photovoltaics and other electric/electronic applications has soared the price remained depressed.
That is now correcting, and for investors who have missed the gold story, which is nearly everyone, silver is the obvious route to acquiring a stake in monetary metals.
Meanwhile, silver is making up for lost time and its bull appears to be unstoppable.
This is next:
While we can point to statistics and stories about supply and demand, the common factor is a decline in the dollar, whose trade weighted index still points lower:
This fits in with gold going higher.
But if gold does rise to targets based on technical patterns, it is unlikely to be just a dollar crisis.
Time to batten down the hatches!
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