Gold Forecast – When Gold Breaks Above $2000, it May Never Look Back

Before we get into the charts, let’s take a quick look at interest rates and macro.

• January inflation came in above expectations suggesting the Fed may have to hike further.
• The repricing of short-term interest rates is putting temporary downward pressure on gold.
• Gold could trade sideways to lower for a few weeks as interest rates adjust.
• The next rally in gold could break above the $2000 level.

Consumer Price Index

The CPI for January increased by 0.5% versus the anticipated 0.4%, printing an annual rate of 6.4%. Inflation is headed in the right direction, just slower than the Fed wants.

Fed Watch Tool

The recent inflation surprise is pushing short-term rates higher. Now the market is forecasting a 48.6% chance Fed funds will reach 5.25% to 5.50% by June. A month ago, those odds were just 6.2%.

2-Year Treasury Yield

The 2-year yield has been creeping higher over the potential for more Fed rate hikes. Rising short-term rates are putting downward pressure on gold. I’m not sure how long this will last, but gold should rally to new highs once rates peak.

Gold Forecast

I expect gold to trend with an upward bias in 2023, but I see the potential for a multi-month pullback once we enter recession.

I’m still looking for a sustained breakout in gold above $2000 within the next 12 months; I’m not sure if it will come in the first or second half.

When gold does break officially above $2000, it might do so with such force that it could leave the $2000 area in the dust.

Our Gold Cycle Indicator is at 138 and could dip back into the bottoming zone.

Gold Weekly Chart

From 1990 to 2005, gold consolidated below the $400 – $450 area. When gold finally broke above $450 in late 2005 – it never looked back!

Current Setup: Gold has been consolidating below $2000 for almost 12 years. It’s possible that when gold does break through $2000, it could take off and never look back.

Gold Daily Chart

Gold is correcting as interest rates creep higher. Prices are below the 50-day EMA and could slip back towards the 200-day over the next few weeks. Gold should resume its uptrend once interest rates peak. I’d like to see a breakout above $2000 in June or July.

Silver Daily Chart

Silver rallied over 40% off the September low, and prices are correcting. I’d like to see a cycle low between here and $21.00. Sustained closes below the 200-day MA would be short-term bearish.

GDX Daily Chart

Miners were unable to breakout above $33.00 on their first attempt, and prices are correcting.

I see significant support surrounding the 200-day MA (currently $27.60). Near-term, prices are oversold.

I’m looking for a breakout in GDX above $33.00 to signal the next big up leg in precious metals. I’m confident it will happen; just unsure when.

Conclusion

With interest rates repricing a higher terminal rate, it now looks like the correction/paus in precious metals could last a bit longer – maybe March or April. Once rates peak, gold should rally and perhaps breakout above $2000. The next major move in gold will come when interest rates are falling.

Disclaimer: I own gold, silver, and miners, and I’m very bullish.

AG Thorson is a registered CMT and an expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more charts and regular updates, please visit here.