For long-term precious metals investors, the ride in gold prices is enormously frustrating — no matter what we tell ourselves. Since the collapse of the bullion market in 2011 — when gold hit an all-time high — bullish analysts have always talked about the yellow metal’s “potential.” That was a message that investors ate up at the time, perhaps to dull the pain or justify their “paper” losses.
But we all know that potential is horse manure. We all have the potential to be astronauts — few of us actually get there. And no amount of self-help talk will compensate for actually showing up when it matters the most. This is the struggle that gold and precious metals proponents find themselves in — how to convert potential into actual profitability?
The bullion markets have not been helpful in terms of inspiring confidence. Gold prices looked achingly close to breaching the $1,400 level in 2016. Unfortunately, two clear attempts in the middle of summer were denied. Subsequent rallies were capped at lower and lower ceilings, indicative of increased bearish activities. It was still a profitable year for gold bullion and other precious metals — but oh the potential for more!
For those that have held onto their bullion portfolio, good times may finally — finally! — be upon us. Presently, gold is in the middle of forming a bullish pennant formation that is anchored by the lows of late-2015, and the highs of summer 2016. Over the past nine months, gold prices have trended in an increasingly tighter range. At the apex of this triangular formation, the pressure cannot be condensed anymore — either we get a breakout or a breakdown.
To add even more encouragement, the current bullish pennant formation is inside an even bigger pennant. This giant one is anchored by the lows of the Great Recession, and the peak highs of 2011. Such formations inside a formation imply an enormous, perhaps a once-in-a-lifetime rally in gold and the precious metals bullion market. Largely, this is due to the fact that the technical pattern took so long to develop.
From a personal perspective, I completely understand the frustration associated with gold prices. On paper, bullion has been my worst performing asset. Nevertheless, I’m encouraged by the technical developments we’re seeing, and I intend to add more physical to my portfolio.