Gold Nearing Resistance! Past Breakouts and Similarities to 2003?! StockChartoftheDay February 16th 2024

In today’s stock chart we look at the price of Gold. Gold continues to trade in a range of roughly $2000 to $2100 after spiking above $2100 in early December 2023. If we look at the longer term price of gold we will see there is a definite resistance level in this 2100 area going all the way back to 2020. Therefore, this $2100 area represents near 4 year resistance. There is a term in technical analysis that the “longer the base the more the space” meaning the longer a commodity or stock bases the bigger the breakout will be once it breaks out.

If we look at the last 20 years in gold we will see two similar prior resistance levels . The first was from 2008-2009 when $1000 represented resistance. For almost a year Gold tired to break 1000 first in the summer of 2008 then the spring of 2009 then finally that summer it broke out. Gold eventually went to nearly $1900 an ounce which represented a near 90 percent gain from the resistance level and a near 150 percent gain from its intermediate low from its first failed breakout at $700 in October 2008. 

The second time frame was 2016 to 2019 gold tried numerous times to break $1450 now $1400 was not an all time high level like $2100 is now and $1000 was in 2008 and 2009. However, it was a level that had held for years. Finally in 2019 gold broke out after numerous attempts over 4 years. Eventually gold went to $2100 a 50 percent gain over the breakout level and a 75 percent gain of its intermediate low of $1200 after one of the failed breakouts.l 

Despite this I think the time period this is most similar to is 2003. In 2002 Gold was moving higher. The resistance level on Gold was the $425 level which had been resistance going all the way back to the mid nineties. In January of 2003 gold went to near this $425 level as the war in Iraq began. Gold then backed off until the spring of 2003 as again it was knocked off resistance. However, interest rates still had a bit to go on the downside and the reinflation trade (the market was completing a 3 year bear market) was about to start. This led to Gold breaking out in 2003 and 2004 and trading all the way to $600 by 2006 and $1000 by 2008! This means that gold was up nearly 140 percent after breaking out in 2003 by 2008.

From all three of these instances we can see that once gold broke its long term resistance it went anywhere from 50 percent to 140 percent above that prior high. This would mean that gold could go anywhere to the $3000 an ounce to $4700 an ounce range on the next breakout.