Gold Bull Pennant #3 Forming?Gold has been in a massive rally for 21 months now, sparking in February of 2024 after Austan Goolsbee seemingly dismissed continued high CPI prints, instead focusing on the rate cuts the Fed had started to forecast a year earlier. That's led to a historic run in gold prices and along the way, there's been a clean technical backdrop of higher-highs and higher-lows as a clear bullish bias continued to drive.
There have been two notable periods, however, where that rally took pause, and it seems like we're now in a third.
In the final two months of last year, right around the US Presidential Election, gold formed a symmetrical triangle. This, of course, was after the Fed started to cut rates but there was also a push-higher on inflation expectations, which drove Treasury yields up. Also notable is the fact that Bitcoin came to life in a very big way at the time, spurred along by the election of President Trump and his crypto-friendly campaign. This is when Bitcoin ran up to and beyond 100k for the first time.
That consolidation took two months, and bulls broke out in early-2025 trade as that symmetrical triangle took on the tone of a bull pennant.
The rally then pushed through the first three-and-a-half months of the New Year, with another high setting around Easter at the $3500/oz level.
Again, a symmetrical triangle developed as longs used bounces to take profits and buyers used the pullbacks to add exposure. Normally - a symmetrical triangle carries little to no directional bias, as it's essentially just lower-highs and higher-lows, illustrating consolidation. But when meshed with a prior trend of such strength, a bias can be borrowed; and given that greater profit taking didn't show and, instead, fresh buyers are coming in to bid dips at higher-lows, there's a bullish connotation to the otherwise directionless consolidation.
That second triangle took four months to build - and it finally broke out when Jerome Powell signaled his willingness to cut rates at the Jackson Hole Economic Symposium. After which, once again, gold went parabolic.
Now we have a third period of consolidation and similarly, this aligns with the Fed acting a bit more prudent, refusing to commit to a December rate cut. There's also the opacity around data as the government shutdown in the US has restricted the flow of inflation data that will be key for the Fed's decision making.
At this point, there's little reason to suggest that the big picture bullish trend is over, but one has to imagine that positioning remains heavy to the long side. So, pullbacks or tests of support can remain attractive, but caution must be exercised after rallies as longer-term bulls still holding positions may use those bounces to reduce exposure.
For now, $4k is the major line in the sand. If we get another breach below that, there could be excuse for longer-term bulls to take profits and that can lead to a deeper pullback.
But, for now, it appears as though we have a third bull pennant forming and this one is only about a month old compared to the two months of late 2024 and the four months from the middle of this year. - js
