After briefly rising above $2,000 per ounce in August, gold has not been able to catch a break. While Bitcoin and many stocks have gone ballistic in recent months, the yellow metal has fallen 17% since its peak last summer. There are many investors in the cryptocurrency community who believe that Bitcoin is the new “digital gold” that is poised to surpass and replace metallic gold, which explains gold’s lackluster performance in the past several months. There are other investors, however, who believe that Bitcoin is a gigantic bubble or Ponzi scheme that will end in disaster, which will ultimately help to reaffirm gold’s place as the premier safe haven asset.
Other investors (including myself) take a more inclusive approach and believe that Bitcoin and precious metals can and should co-exist in a portfolio of safe haven assets. In this piece, however, my goal is not to debate the merits of Bitcoin vs. gold; I simply want to share some key charts that I believe are helpful for determining where the price of gold is likely heading next.
The daily chart shows that gold futures have been trading in a channel pattern since August 2020. Gold is also sitting above the $1,700 support level that formed last spring. If gold can push above its channel pattern in a decisive manner, it would increase the odds of further bullish action. On the other hand, if gold breaks below this channel pattern and the $1,700 support, it would give a bearish signal.
Daily gold chart
The weekly chart shows gold’s channel pattern as well as an uptrend line that started in early-2019. Gold’s uptrend of the past couple years remains intact as long as it stays above this uptrend line; if it breaks below it, however, it would give a bearish confirmation signal.
Weekly gold chart
The monthly chart shows a much-longer term uptrend line that started in the early-to-mid-2000s. Gold’s long-term uptrend remains intact as long as it stays above that uptrend line.
Monthly gold chart
For now, I am watching how gold acts at the lower bound of its channel pattern as well as the $1,700 support: will it stage a rally or break below? Regardless of the short-term action, I am a long-term believer in gold and silver as a hedge against the actions of global governments and central banks, which have been recklessly racking up debt and printing money like there is no tomorrow with no end in sight.
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Jesse Colombo is an economic analyst and Forbes contributor who warns about bubbles and future financial crises.
In 2008 – at age 22 – he was recognized by The Times of