Gold has had an exciting year, with multiple breakout events putting it in the spotlight for investors. Among these is gold’s recent breakout above its 13-year “cup and handle” pattern, pushing it past $2,100 per ounce. This technical pattern is considered a powerful bullish signal, and while gold’s price may experience brief pauses or minor corrections, experts believe it is on track to hit an impressive target of $3,000 per ounce.
Key Precious Metals Breakouts You Should Know
Aside from gold, silver has also made significant moves, breaking through four-year resistance at $29 per ounce. Although this upward trend in precious metals has encountered slight reversals, such as GDX (Gold Miners ETF) pulling back due to Newmont Mining’s recent performance dip, the long-term outlook for these metals remains highly optimistic.
Two Major Breakouts Set to Drive Gold’s Future Performance
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Gold vs. the 60/40 Portfolio
The first major breakout to watch is gold’s performance against the traditional 60/40 portfolio (60% stocks, 40% bonds), which aims to provide a balance of growth and stability. Gold recently closed October at a three-year high relative to the 60/40 portfolio, suggesting a potential turning point. Historically, this type of breakout has been a precursor to new long-term bull markets in gold. When this ratio crossed key resistance levels in 1972 and 2002, it signaled the start of strong uptrends in precious metals. While full confirmation may take a few months, the current setup could mean we’re witnessing the early stages of a significant bull market for gold.
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Inflation-Adjusted Gold Price
The second major breakout lies in the inflation-adjusted gold price. Recent data from MacroTrends shows that October’s inflation-adjusted gold price reached its second-highest level ever, just $3 shy of an all-time high. When adjusted for inflation, gold is within 2% of its historical peak, indicating that the market may see even higher prices. Gold’s inflation-adjusted performance is a crucial indicator of long-term potential in gold stocks, as it directly impacts mining margins and overall profitability within the sector.
What These Breakouts Mean for Investors
The current cooling off in precious metals prices is actually a healthy sign, as it suggests that the market may avoid overbought conditions. Silver recently tested a monthly resistance level at $35 and saw some selling pressure, while gold briefly touched $2,800 before pulling back. The GDX and GDXJ ETFs, which track gold mining stocks, also showed that nearly 95% of stocks in this sector were above their 20-day, 50-day, and 200-day moving averages before the recent pullback. This decline could offer a valuable opportunity for investors to enter the market before the next surge.
Why Now Might Be the Best Time to Position in Gold
For those looking to make strategic investments, this period of cooling in gold and silver prices offers an ideal moment to identify high-quality junior mining companies. With a potential breakout looming in gold’s inflation-adjusted price and its strength against traditional portfolios, this sector could see considerable gains over the long term. A focus on companies with strong asset bases and good valuation could yield significant rewards as gold’s price potentially heads towards $3,000 and beyond.
The Bottom Line
The ongoing trends in gold signal a potentially explosive upside for the precious metal, especially as it gains traction against inflation and the 60/40 portfolio. For investors who are patient and strategic, the current dip provides a prime opportunity to buy before the next big breakout, positioning for future gains as the gold market heats up.
Source: (Investing.com)
