Gold Breakout Revives Spotlight on Precious Metals

The recent gold rally has brought the precious metal back into the collective conscious. For the past 6 years the SPDR GLD, the gold-backed ETF has traced a base pattern. Its recent short-term momentum spike has sent investors into a frenzy about the future price pattern.

Gold Breakout

The Gold Breakout

 

Gold prices have been the highest in 14-months. It is outperforming copper and breaking previous resistances. The 2016 resistance of $130 was broken and is now approaching the $150 mark. Trade analysts recommend waiting till the prices pull back a little before investing. Perhaps a pullback to the breakout point is in the cards. Since higher highs are on the horizon, a lower entry point will be beneficial. The broken resistances may turn into supports, and the short positions will buy to cover at these points. This will generate more consumer interest and drive up the price.

 

Lack of Support

 

An upward surge in gold is mainly observed during times of crisis or inflation. The current rise can be attributed to trade tensions and Fed rates speculation. However, there is a slim chance of inflation in the short-run. Trade tensions are also cooling post a productive G20 summit. Hence, the gold market is likely to keep trading within a range in case of no sudden global scares. The most significant resistance is the April 2013 trading mark of $150.

 

Long-term Movement

 

However, if the Fed remains dovish on the rate cuts, inflation is likely to pick up in the long run. Along with it, the gold prices will also see a continuous upward movement in the gold breakout and a possible $150 breakthrough. If interest rates are cut and trade tensions continue to escalate, gold investors will be rewarded in six to eighteen months.

 

The recent gold breakout has caught people off-guard since gold has been in a narrow trade range for 5 years. It is important to analyze the underlying cause of movement before making investment decisions. Investors are currently buying gold as a risk-off investment. This indicates that they perceive the current economic environment as unfavorable for risky investments.