As stocks have dipped in and out of a correction, safe-haven gold has broken a trend and failed to catch a major bid.
"Gold can't seem to get any momentum above $1,350, yet it doesn't drop. So that's been consolidating sideways," Jeffrey Gundlach, DoubleLine CEO and Wall Street's "bond king," told CNBC's Halftime Report on Wednesday. "It will be interesting to see which way they break."
Its period of consolidation could come to an end with a breakout as soon as the third quarter, says another market strategist. Until then, keep its year's gains in perspective.
"You've really got to back away from the forest to really see these trees," Bill Baruch, president of Blue Line Futures, told "Trading Nation." "This gold market bottomed in 2015 and it's had higher lows in 2016, 2017."
Gold prices tumbled to $1,049 an ounce in December 2015. Since then, prices have gained 27 percent and never come close to dipping below the $1,000 mark as they did during the financial crisis.
"This has been extremely constructive even to a point we almost have a bull flag building since the January spike," said Baruch.
Gold hit the year's peak of nearly $1,363 an ounce on Jan. 25, the day before the S&P 500 reached a record high. The technical bull flag sign shows a strong uptrend in an asset price, such as gold's rise through mid-December to the end of January, followed by a period of consolidation. Prices have held within a fairly narrow trading range of $1,300 to $1,360 this year.
Gold will "have a big second half of the year. I expect it to break out above $1,400 sometime before August or September," said Baruch. "The dollar's going to be a catalyst and now the trade war can also be a big catalyst."
The U.S. dollar should head lower this year, potentially declining another 5 percent to 7 percent, Baruch said. The recent passage of a $1.3 trillion spending bill and a spike in defense spending will likely pressure the dollar, triggering a rally in gold, he added.
A rise to $1,400 an ounce would represent a nearly 5 percent increase from current levels. Gold has already increased 2 percent this year.
Larry McDonald, editor of the Bear Traps Report, is also bullish on gold prices as investors eschew bonds. When stocks sell-off, bonds are often seen as a safe haven in which to park money. That relationship appears to have broken down this year as a multidecade bond bull market comes to a close and the government puts to auction a record amount of debt.
"That's going to create a flight of capital out of bonds, out of equities, and into alternatives like gold. I'm extremely bullish at these levels," said McDonald.
The yield on the 10-year Treasury bond has increased nearly 15 percent since the beginning of the year. Bond prices move inversely to yields.