Gold Price Forecast: Consolidation Followed By A Summer Breakdown

The liquidity the Fed provided seems to be working. Equities have risen sharply from their March lows, and the NASDAQ reached new all-time highs. With fear subsiding, gold has begun to take a back seat. We see the potential for a top in the coming days, followed by a summer breakdown.

Repeated Patterns

Every few years, gold tends to consolidate for a few months and then breaks lower. We had similar consolidations in 2016 and 2018. Each resulted in a significant breakdown once gold fell below key support. I don't think the 2020 breakdown will be as severe (gold is in a bull market this time), but a deeper than expected correction remains possible. 

The 2016 Consolidation:

The 2018 Consolidation:

The 2020 Consolidation 

Overall, I think the 2020 consolidation could go on for another month. Eventually, gold prices should break below $1660, and approach our primary target between $1500 and $1550. A deeper correction to the secondary target ($1350-$1420) remains possible. Gold would have to rally sharply above $1800 to register an upside breakout.

I think we will see a better buying opportunity for gold later this year. Longer-term, demand for precious metals should increase as debt expands…endlessly. Investors are beginning to wake up to this fact and are losing confidence in governments and their ability to manage.

We believe gold started a multi-year advance that should last well into the decade. Our Gold Cycle Indicator is near topping (currently 332), and an intermediate cycle peak is plausible.

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