Gold Hits New All-Time High: Here’s Our Near-Term Price Target
Labor Day was no holiday for gold, as prices continue to rise.
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I hope you enjoyed your Labor Day holiday. While many of us took a three-day weekend and enjoyed friends, family, and maybe even a barbecue, gold was hard at work.
Gold roared to life, reaching an all-time closing high on Monday. It was the fifth consecutive session of price increases for the yellow metal.
Spot gold climbed as high as $3,489. Meanwhile, December gold futures climbed as high as $3,557 per ounce
Two Gold Targets: One for the Short Term, One for the Long Term
It’s only been two weeks since we placed a $5,000 target on gold. That’s a long-term objective, one that could take years to achieve.
What will happen to the price of gold in the near future? Let’s go to gold’s daily chart for the answer.
Over the past four months, gold has formed an ascending triangle pattern. Using an old-school measuring technique, this bullish consolidation pattern suggests a near-term price target of $3,750 is possible.
The Long View for Gold
For a broader perspective, we go to spot gold’s monthly chart. Here, the rally of the past two years is given context. Gold roared higher after breaking out of a cup-and-handle pattern (shaded yellow) that took a decade to form.
On the upper right corner of the monthly chart, the price appears to be breaking out of the four-month ascending triangle/consolidation.
That same pattern was the focus of the daily chart (shaded green). From this perspective, the consolidation of the past four months appears to be little more than a speed bump.
Interest Rates and Inflation
Why are gold prices consistently rising? It could be due to uncertainty over the future directions of interest rates and inflation.
The Fed funds rate is about to fall, with the U.S. Federal Reserve expected to reduce that short-term rate by 25 basis points on September 17.
Meanwhile, inflation remains a question mark.
July’s personal consumption expenditure price index (PCE) inflation gauge came in as expected, as did July’s consumer price index (CPI). But prices at the wholesale level, represented by the producer price index (PPI), came in on the high side.
It remains to be seen if July’s PPI was an anomaly, or if inflation is truly on the rise. The sudden, dramatic rise in gold prices could be a sign that the fight against inflation has yet to be won.
At the time of publication, Ponsi was long gold.
