The SPDR Gold Shares ETF (GLD) dropped 45% from its 2011 high to its 2016 low. It has been basing under the 38% retracement level of that range for the last five years.
This extended period of horizontal consolidation has formed a “W”-bottom with resistance situated in the $132.50 to $132 area.
There is a technical expression that goes something like, “the wider the base, the higher the break,” or words to that effect. I simply measure the height of the pattern and add it to the breakout level.
In this case, it projects an upside move that targets the $161 area.
An old fashioned dynamic seems to be taking place in the market right now. Gold is being used as a place of refuge. It is certainly not bitcoin.
If the market continues lower and if some panic selling sets in, the yellow metal should continue to move higher. A break above technical resistance could trigger even more buying.
But if the stock market is able to stabilize and volatility dries up, the bullish gold trade will be abandoned before it starts.