
In a May 7 Barchart article, I asked, “Is Gold on a Launchpad?” I pointed out that while June gold reached a nominal new record high at $2,085.40 per ounce, the continuous futures contract stopped rising at the same level as the 2022 $2,072 high. With gold futures $100 lower on May 26, the technical formation looks much more significant in late May than it did a few weeks ago.
In early May, I highlighted that each correction in gold had been a buying opportunity since the 1999 low. Moreover, government buying to increase gold reserves has supported the price. While the $100 decline from the high is a mere blip on the long-term chart, the most recent high has the potential to be a significant top. On the other hand, the odds favor another golden buying opportunity on the way to another in a series of record peaks.
A double-top formation in gold futures
While the June COMEX gold futures contract rose to a new nominal $2,085.40 peak on May 4, the continuous futures contract could not manage a new high.

The twenty-year chart highlights the rise to $2,072 per ounce, precisely the same price as the March 2022 high, creating a double-top on the long-term gold chart.
Double top and bottom formations are reversal chart patterns in technical analysis. The failure to reach a marginal new high led to the selloff in the gold futures arena, which took the price below the $1,950 level on Friday, May 26.
De-dollarization supports higher gold prices
Central banks hold gold as a foreign currency reserve asset, validating gold’s role in the global financial system. Over the past years, central banks, governments, monetary authorities, and supranational institutions have been net buyers of the precious metal.
After purchasing a record amount of gold in 2022, central banks continue to buy the metal in 2023. China, Russia, and their allies have led the trend towards de-dollarization, threatening the U.S. currency’s role as the world’s reserve currency. The move towards a BRICS currency to challenge the dollar is a significant event. Ruchir Sharma recently wrote, “The oldest and most traditional of assets, gold, is now a vehicle of central bank revolt against the dollar.”
The current debt ceiling issue facing the U.S. and the potential of a credit downgrade only increases gold’s utility in the worldwide financial system. Late last century, the Bank of England auctioned half of the U.K.’s gold reserves, mistakenly believing gold was a barbarous economic relic. Gold has made higher lows and higher highs since the 1999 $252.50 per ounce low. The trend towards de-dollarization favors higher gold prices.
Inflation remains a problem
The Fed increased the short-term Fed Funds Rate by 5% since March 2022, and quantitative tightening has put upward pressure on longer-term interest rates. However, the global pandemic’s legacy that pushed inflation to the highest level in decades remains a challenge for the U.S. central bank. Supply chain problems, the tidal wave of central bank liquidity, and the tsunami of government stimulus and spending continue to filter through the U.S. and global economies. Inflation has stabilized and turned lower over the past months as rate hikes have weighed on economic demand, but supply-side economic issues remain beyond monetary policy’s reach.
Moreover, the threat of a debt ceiling impasse with U.S. debt at over $31.7 trillion could cause a credit downgrade, adding to inflationary pressures as it will weigh on the U.S. dollar’s value and the demand for U.S. government debt securities. A lower credit rating will cause foreign and domestic investors to demand higher rates for bond purchases. Higher inflation and a falling U.S. dollar are bullish factors for gold.
Geopolitics support gold
While the global pandemic briefly caused the world to join forces to combat the virus in 2020 and 2021, the early 2022 “no-limits” alliance between Russia and China, Russia’s invasion of Ukraine, and China’s plans for Taiwanese reunification with mainland China have bifurcated the world’s nuclear powers with significant geopolitical ramifications. The threat of another World War has increased dramatically since February 2022.
Tension on the geopolitical landscape is bullish for gold for three reasons:
- Gold’s high value makes it a critical flight capital tool during wars.
- China and Russia are leading gold-producing countries and have likely vacuumed in domestic output to build reserves. Therefore, governments have probably purchased even more gold than central banks reported. Gold holdings are state secrets and a national security matter in China and Russia.
- While the yuan and ruble are not freely convertible currencies, significant gold holdings can support their values if BRICS countries unite to challenge the dollar. In March 2023, President Xi told President Putin, “Change is coming that hasn’t happened in 100 years…and we are driving this change together.”
The bottom line is the current geopolitical landscape supports gold.
I favor the upside, but double tops are a dangerous signal
Despite the recent bearish technical formation, the long-term bullish gold trend looks likely to continue.

The chart dating back to 1975 when gold began free-market trading in the U.S. highlights the over two-decade bull market. While the 2022-2023 double-top could cause the price to continue to correct, critical technical support for the long-term bullish trend stands at $1,613 per ounce, the September 2022 low.
Since 1999, every dip in the precious metal has been a golden buying opportunity, and central banks and governments worldwide will likely increase buying as the price declines. While the bearish technical pattern may have delayed an explosive rally, gold’s bull market remains firmly intact in late May 2023.
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On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.