Gold's golden cross: The metal just formed a chart pattern that can signal a breakout

Key Points
  • Gold's 50-day moving average rose above its 200-day moving average on Monday, a bullish chart signal.
  • When the shorter-term 50-day moving average crosses above the longer-term 200-day moving average a "golden cross" is formed.
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Gold is up nearly 10 percent this year and might be primed for more gains if a signal tracked by technical analysts triggered Monday is any guide.

A small gain was enough to push the metal's 50-day moving average price above the average price of the last 200 days, forming what's known as a "golden cross" in technical analysis circles. This is seen as a positive signal that demonstrates an asset is outperforming so well in the short-term that it may reverse a longer term downtrend.

Gold since Feb. 6 with 50-day and 200-day moving averages:

Source: FactSet

Gold futures for June delivery rose 0.62 percent, or $7.80, to settle at $1,261.40 per ounce Monday, adding to its already strong yearly performance. The precious metal is outperforming the index, which is up more than 6.5 percent, as investors hedge against the possibility that the Trump administration does not succeed in pushing through its pro-growth agenda.

To be sure, some technical analysts believer there's more work to be done before this is a true gold breakout.

"In my humble opinion, gold remains in a tight jam," forming a so-called pennant pattern between a 16-year rising support level and a falling six-year resistance level, said Chris Kimble, founder of Kimble Charting Solutions, in a note.

"Pennant patterns tend to frustrate both bulls and bears, as little net progress is made, [and] only quick traders make money in this pattern," he said. "Pennant patterns don't suggest which direction any asset will take. They do historically suggest that when the breakout/breakdown takes place, it is usually a big one."