If you follow my work, you know I love studying market history and employing analogs. Market moves of the past can inform the future.
It has been a while since I’ve updated the analogs for Gold.
Gold was tracking the average of all bull market corrections and the ensuing rebounds until the recent decline below $1900.
As a result, the best historical comparison is the 2016 to 2018 correction. That correction ended a few months before the Fed's last rate hike in that cycle, and later Gold broke above 6-year resistance when the Fed cut interest rates.
The average and the 2016-2018 analog put Gold around $3000 in two years.
The best comparison from a bird's eye view perspective continues to be the 1996 to 2005 period as it applies to the last nine years.
Gold exploded in late 2005 after an 18-month-long consolidation that was part of an irregular cup and handle pattern.
The current cup and handle pattern is larger, fits the textbook parameters, and is more bullish. However, it could take more time to complete.
The outcome is likely to be similar as a breakout past $2100 would lead to a vertical move.
Gold appears to be trading in a very bullish consolidation pattern. It could test even the low $1700s and remain in a very bullish consolidation.
The Gold to S&P 500 ratio is trending higher and above an upward sloping 200-day moving average. See the yellow.
The blue vertical lines show the start of Fed rate cut cycles. The Fed shifting its policy later this year could be the trigger for the significant breakout in Gold.
Investors may have a few more months to accumulate high-quality juniors at very good values.
I continue to be laser-focused on finding quality juniors with at least 5 to 7 bagger potential over the next few years.
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