Gold prices closed the week at $1,494 per ounce—just below the $1,500-per-ounce support level. This consolidation has now concentrated into a classic “pennant” formation (see the following chart).
The bullish moves that gold made forming the vertical portion of this pennant broke above the previous highs of the last three years, indicating the beginning of a new cycle for the precious metal.
In its webcast “The New Gold Standard,” investment firm VanEck (which offers gold mining ETFs such as GDX and GDXJ) asserts that the strong performance of gold in 2019 reflects the immense change that has taken place in the gold market.
Says VanEck, “Over the latest economic expansion, gold had traded in an unexciting range and the benefits of a gold allocation were devalued. In our view, gold mining companies were also being penalized for the costly missteps of previous regimes. Then this year, economic and geopolitical shifts formed the foundation for what looks likely to be a new long-term bull cycle for gold. …”
With this identification of a new gold bull market, the current consolidation pattern may provide an opportunity for investors to increase their gold portfolio allocation.
Rick Andrews is president of Avant Capital Management.