Gold breaks out of multi-year pattern, greater than 80% upside potential

This week the SPDR Gold Trust (GLD) broke out to a new all-time high.

This follows almost four years of choppy sideways trading. Add to that, the four years of sideways trading was also the “cup” portion of an even larger, more than decade-long, cup-and-handle pattern.

The breakout signals the potential for a multi-year uptrend in gold.

• Intermediate target: $240 to $250 on GLD which could be seen over the next one to two years.
• Long-term target: $350 to $370 over the next several years
• There is historical precedent for a 250% or greater rally

Cory Mitchell, an analyst with Trading.biz, breaks down the targets.

“The recent four-year range covered an approximately $44 price area on GLD. Added to the breakout price of $194.15 gives a target just below $240. The price rallied approximately 30% from the bottom of the range to the top. Adding 30% to the breakout price gives a target near $250.

Longer-term targets for the large pattern vary between $285 and $370 based on the various dollar and percentage movements over the last decade.

The nearest historical precedent for this current situation is the 2005 gold breakout. The “cup” took eight years to form, and the “handle” formed over another two. The current “cup” also formed over eight years and the “handle” has been forming for four. Following the 2005 breakout, the price ran more than 310% before ultimately topping in 2011.

A 300% rally from the current breakout level would put the price of GLD at $775 in 2030 (if moving at roughly the same pace as it did in 2005 to 2011).”

While the bullish situation is currently in play given the recent breakout higher, it may not play out that way. The price has been moving sideways for nearly four years. It could continue to move sideways for longer by dropping back into the range.

The rising lows since 2023 indicate an uptrend in gold, and that uptrend is still underway signalling higher prices to come. Yet traders and investors should be aware that there are no guarantees. A drop below the February swing low of $183.78 would signal the uptrend is weak or in trouble and could signal more ranging behaviour or potentially a downtrend back to the bottom of the range near $151.