Yesterday marked a historic milestone: the spot gold price officially closed above $3,000 per ounce for the first time. While gold futures, which usually trade above spot gold, briefly tested this level last week, they failed to hold above it.
However, yesterday's close confirms a real breakout, consolidating this critical psychological threshold.
The main driver of gold's recent rise is growing economic uncertainty and the increasing risk of a recession, something I have been warning about for months.
Yesterday's events further validated these concerns, including U.S. Treasury Secretary Scott Bessent's acknowledgement of the possibility of a recession, a weaker-than-expected retail sales report and a sharp drop in manufacturing activity in New York State.
Now, let's delve into the technicals, starting with COMEX gold futures, which I find more useful for analysis than the spot price, as $100 increments in COMEX gold often serve as key support and resistance levels.
With gold futures on the COMEX officially breaking above the critical $3000 mark, we have entered bullish territory, meaning there are no clear resistance levels above, suggesting a more fluid path. That said, I would keep my eye on $3100 as the next target and potential hurdle.
China's gold benchmark, Shanghai Futures Exchange (SHFE) gold futures, broke the 590-640 trading range in late January, a strong bullish signal.
More recently, it confirmed this momentum by breaking a bullish flag pattern, which reinforced the uptrend. As the world's largest gold producer (at 370 metric tons in 2023) and one of its largest consumers, China plays a key role in the global gold market.
For months, I have theorized that a resurgence of Chinese gold futures traders - who were instrumental in driving gold higher in March and April - could be the catalyst that propels prices toward $3,000 and beyond. I believe the recent bullish breakouts will make that forecast a reality.
While gold mining stocks have largely lagged gold's rise over the past year, I have predicted that they would eventually gain momentum once gold rose above $3000 and sentiment in the precious metals sector, especially in the West, warmed up.
Indeed, this turnaround appears to be underway, as evidenced by the action of the large-cap VanEck Gold Miners ETF (GDX), which recently broke out of a long-term triangle pattern dating back to 2011, a highly bullish development. For confirmation, I'm waiting for GDX to close definitively above the key $42-$46 resistance zone, and it looks like that time is near. I will be keeping an eye on it.
Also, the VanEck Junior Gold Miners ETF (GDXJ) broke out of a long-term triangle pattern in early 2024, signaling the start of a new bull market.
For full confirmation, I am now waiting for a decisive close above the key $50-$60 resistance zone, which would solidify the uptrend and open the door for a much larger rise.
The growing risk of a recession is a key factor behind the recent surge in the precious metals market:
The bull market in gold and silver is still in its early stages for a number of reasons, including the break in the Dow/Gold ratio, indicating that capital is currently rotating out of stocks and into gold.
This change will accelerate as the stock market bubble bursts.
There are numerous signs that the U.S. stock market is in a huge bubble, which will end disastrously and cause a major shift of capital into gold, silver and mining stocks.
For example, the cyclically adjusted price-earnings ratio chart of the S&P 500 reveals that stocks are currently more overvalued than they were in 1929, just before the stock market crash and the Great Depression.
In short, whichever way you look at it, gold is in fertile ground: this is its time to shine. With no clear resistance and a clear uptrend, it is best to follow the momentum rather than fight it.
This is the moment we gold bulls have been waiting for, so enjoy it! I believe gold still has a lot of upside potential, driven by the growing risk of recession and an over-inflated stock market that has only just begun to crumble.
As gold prospers, I expect mining stocks and silver to follow suit. We live in exciting times, and we have earned this momentum by staying true to gold when it was ignored in favor of speculative, high-tech assets. Now, as these gimmicks fall into disuse, people are waking up to the true value of precious metals.
Jesse Colombo, Money Metals