Gold's Next Big Challenge in 2014

Gold has a huge challenge ahead of it in the coming weeks.

If the yellow metal can break above a key price barrier, it has the opportunity to regain some of its mojo lost in last year’s horrific selloff…

Here are the facts:

Gold has greatly underperformed the broad market since late 2012. Yeah, I know that’s old news. But so far, 2014 has been completely different.

Commodities are streaking across the board. I told you recently that someone “flipped the switch” this year, triggering breakout after breakout. Coffee and natural gas are just two examples that zoomed right out of the gate this year. And taking a bigger picture look shows the S&P GSCI Commodity Index testing a major breakout zone after a huge 3-year coil.

Meanwhile, gold is also sneaking higher. After taking its licks last year, it’s quietly starting to outperform stocks…

Gold Price vs. S&P 500, 2012-Present

This little breakout could help gold tackle its next big challenge: resistance at $1,350. That’s the price you should watch over the next several sessions. Gold was sneaking closer to this mark earlier this week. But after a four-day winning streak, gold took a tumble at $1,345 — and it hasn’t moved much since.

Even with some constructive price action this year, you have to remember that gold is in a bear market right now. I’ll continue to view the metal with a skeptical eye until it can prove that this recent move is more than just a bear market rally…

Regards,

Greg Guenthner
for The Daily Reckoning

P.S. Whether this breakout turns around my outlook for the yellow metal remains to be seen. But one thing’s for sure… I’ll be watching its movements very closely, and as soon as I have a way to play it, my Rude Awakening readers will be the first to know. Sign up for FREE, right here, to make sure you know how to cash in no matter what gold does.