Gold just had its worst week in over two months, but one technician says the precious metal is headed for a breakout.
The yellow metal is often used as a hedge against inflation; however, Carter Worth, Cornerstone Macro's head of technical analysis, argued that there is no reputable relationship between the two.
"It's ambiguous what [gold's] role is as a hedge against inflation, but the thought that it has to go down when rates are going up is not established in any way," Worth said this week on CNBC's "Futures Now. "
On February 21st, the 10-year Treasury yield hit its highest level in four years, underscoring the jitters of some investors worried about rising prices.
"In fact, we know that since December, rates have moved on the 10-year from 2.35 percent to 2.95 percent, and gold is up about 10 percent," Worth added.
Furthermore, while looking at a 10-year chart of gold, Worth noted that there are several bullish technical patterns forming on the chart.
First, "you see there is tension that has been set up since the peak in 2011. You can call it a head-and-shoulders bottom of sorts," Worth said. A 'head-and-shoulders' pattern refers to when a stock makes a high, rallies to a higher high and declines back to the lower high.
"This is the beginning of an important move higher, even though we've already move quite nicely again from the lows of September," Worth explained.
Looking at the same chart, Worth noted that gold has also broken out of a wedge pattern. When there is a breakout from a wedge, technicians often look to that as a bullish sign of an upward trend. "That is also a very constructive set up on a technical basis," Worth said.
Finally, looking back 20 years, Worth compared the performance of gold to the S&P 500 Index, and S&P 500 total return. "What you see there is quite remarkable. Not only is gold beating the S&P on a 20-year basis, it's kept up with dividends reinvested…by my work, there's more to come on the upside," Worth said.
"I think [gold] will be at $1,400" by the end of the year, Worth added.