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Gold Consolidates for a Year-and-a-Half, What's Ahead for 2022?

2021 was frustrating for gold bugs. Let's try to make sense of it all, including a technical discussion.
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Gold Weekly Chart 2021-12-31

It's been a frustrating year for gold fans. Gold started the year at $1895 and is $1826 as I type, with inflation soaring every step of the way. 

That's a decline of about 3.6% when other disk assets soared. But a spotlight on 2021  ignores the huge run from $1167 in mid-2018. Gold acted in advance of inflation is one possible way of looking at things

The Fed has penciled in 6 rate hikes for the next two years, 3 in 2022 and 3 more in 2023. The market seems to believe that as evidenced by Fed Fund Futures. I don't but my opinion doesn't matter. 

Newmont Mining 

Newmonth Mining Weekly Chart 2021-12-31

Newmont Mining, a major gold mining company, pretty much followed the price of gold as to be expected. 

Technically Speaking

Gold Weekly Technical 2021-12-31

Technically speaking, gold is in a Symmetrical Triangle pattern. 

  • Symmetrical triangles occur when a security's price is consolidating in a way that generates two converging trend lines with similar slopes.
  • The breakout or breakdown targets for a symmetrical triangle is equal to the distance between the initial high and low applied to the breakout or breakdown point.
  • Many traders use symmetrical triangles in conjunction with other forms of technical analysis that act as a confirmation.

A symmetrical triangle chart pattern represents a period of consolidation before the price is forced to breakout or breakdown. A breakdown from the lower trendline marks the start of a new bearish trend, while a breakout from the upper trendline indicates the start of a new bullish trend.

Some people have faith in these patterns others don't. If you believe the Fed is going to crush inflation with hikes or that gold is a fool's investment anyway, then you likely think gold will break down or simply don't care. 

A Word About the Future

I don't know what the future holds and neither does anyone else. And there is a lot to be thinking about:

Will the Fed hike? Will Russia invade Ukraine? Will Build Back Better pass, spurring inflation? Will China attempt to take over Taiwan?

I am frequently asked if I have a price target on gold. I don't and I never have. But I am comfortable holding it over the long haul.  

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That is my personal opinion and does not constitute investment advice.    

A Word About Risk

There are risks to owning gold and there are risks in any investment. But if you cannot stand the volatility, gold may not be for you at all. The same applies to equities actually, even if you mistakenly believe the Fed won't let them go down. 

If you do own gold, or equities, don't hold more than you can sleep with. If you are constantly worried about what any market will do, you probably have too much of that asset. 

A Word About Now

Right now, Every Measure of Real Interest Rates Shows the Fed is Out of Control

I discuss projections in The Fed Expects 6 Rate Hikes By End of 2023 - I Don't and You Shouldn't Either

But the fact remains There is No Predictive Power in Fed Projections

The content of this post is provided as general information only and is not intended to provide investment or other advice. This material is not to be construed as a recommendation or solicitation to buy or sell any security, financial product, instrument or to participate in any particular trading strategy.


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