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Christopher Aaron
Gold

We strongly expect that gold is set to break its all-time high above $1,923 per ounce within the next 18 months. However, a correction is due prior to that breakout. The question is: will the corrections start now, or will it begin from higher prices?

Rising Resistance

Below we show the long-term gold chart from 2001 through the present. Note the strong rising trend of resistance (blue) which began from the 2018 lows. Gold has been hugging this resistance boundary for the past two years, but has been unable to overcome it. Meanwhile, on several occasions sellers have appeared on the rising trend, causing $100 – $200 corrections at regular intervals.

This rising trend forms the first resistance level gold is challenging presently.

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2011 – 2012 Resistance

The second major resistance level that gold is challenging is the zone between $1,790 – $1,802 (black), which dates back to 2011 – 2012. Note how following the all-time high for gold in 2011, gold subsequently attempted to overcome the $1,800 zone on three separate occasions; however, each attempt failed, and gold subsequently entered a bear market, which lasted until 2015.

This same resistance zone which rejected gold on three occasions in 2011 – 2012 is now being tested again.

Confluence of Resistance

In sum, there are two strong resistance zones, the confluence of which calls for a correction in the gold price advance at some point before the all-time high is broken.

The outcome for gold over the next several weeks will tell us much about the trajectory through 2021. The first scenario in which gold continues higher immediately, would then be met with selling pressure at the former all-time high near $1,900. We would then expect a 10% – 15% correction into 2021, followed by a break of the all-time high by mid-year. This scenario is shown above in orange.

The second scenario for gold is that it sees a 10% – 15% correction first, perhaps pulled down in the next wave of global deflation, before clawing its way back toward $1,800 in 2021. The breakout above the $1,900 all-time high would then be delayed until late 2021 or early 2022. This scenario is shown above in red.

Takeaway on Gold

We are within a critical time zone for gold. If gold can close for the week above $1,802 spot, it should have a clear shot at the former all-time high before a correction. If gold fails, it will correct first, and then make its attempt at breaking the former all-time high in late 2021. At www.iGoldAdvisor.com we are preparing clients for both scenarios, which should involve some gold exposure now, and additional exposure on any correction within the next 18 months.

For a look at all of today’s economic events, check out our economic calendar.

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