Gold is nearing what could be an ultra-bullish key level

Gold's relationship with inflation expectations has gotten interesting lately, and I'm watching one key level for gold in particular.

Consider this conundrum in the gold market: The metal has traditionally been a good hedge against inflation, but it hasn't seen much demand lately even in the face of rising inflation fears. It's not like gold hasn't rallied, of course; it's up a little over 6 percent since mid-December.

Still, the yellow metal hasn't broken out.

In fact, it has tested key resistance of $1,375 per ounce, but it hasn't managed to break above that level. The $1,375 mark was the metal's highs from both 2016 and 2017, so a break above that line would give gold a technically significant "higher high."

Furthermore, that level is the top line in an "ascending triangle" pattern, so a break above that level would prove quite bullish on a technical basis.

This is particularly true because gold has already broken above its six-year trend line, going all the way back to those 2011 highs.

Of course, we always have to wait for an actual break of this key resistance level before we can declare anything. Still, investors should consider that any meaningful break above $1,375 would confirm that the multiyear downtrend has reversed.

Gold on Thursday was trading modestly higher, at $1,332 per ounce.

Vote
Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect