How Important Is $1,400 Gold And Will The Rally Continue?

With the Fed holding rates steady and saying they will do whatever is necessary to keep the economy expanding, forecasts quickly flipped from expectations of more rate hikes ahead to near certainty of a rate cut this year. This move was inevitable given the underlying fragility of the stock market recovery. This turning point in Fed policy is very significant and has lit the fuse on the next major bull cycle in precious metals.

We had been watching resistance around the $1,365 to $1,375 level for quite some time as it had been stubborn resistance on a few breakout attempts over the past few years. In the short-term chart below, you can see how powerful this recent rally was for the gold price, as it blew clean through this resistance level and has continued to $1,414 as of today.

You can see how nicely gold bounced off trendline support around $1,180 in late May. The RSI at 86 is overbought and suggests there could be a near-term pullback. But this breakout is very bullish for gold and paves the way for a run to new record highs.

Backing out the chart, we can see that the level just below $1,400 was resistance in 2014, 2016, 2017 and twice in 2018. This makes the technical price level extremely important to forecasting future moves. This rally above the $1,400 level marks the highest price for gold since 2013, over six years!

Going forward, I expect prior resistance to turn to support, as it often does during new bull cycles. So, we want to see a bounce at $1,365 or higher if the correction drags the price back below $1,400. By year end, I am targeting a gold price of $1,600 or more and believe that gold is likely to make a new all-time high above $2,000 within the next 24 months.

Adding to the bullish case for gold and mining stocks is the fact that the Gold Miners ETF (GDX) has outperformed gold by a factor of 2.5x over the past month. While gold is up 10%, gold miners are up 25%. I believe we will see more of the same during the back half of the year, so I have been adding mining stocks to the GSB portfolio to increase our exposure.

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Disclaimer: I am not an investment advisor. This is just my personal opinion. Invest at your own risk.

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