4 Charts on Why Carter Worth is Bullish Gold

Carter Worth, Chief Market Technician at CNBC, was on Fast Monday Friday afternoon discussing Gold. Carter previously mentioned a bullish trade in Gold back in December, which proved right. Yesterday he was back to give the crew an update on his thoughts.

Carter notes Commodities, especially in recent years, have traded much worse than imagination would allow but with this, can also surge more than conventional wisdom would expect due to such prior bearish price action. He feels this is what's going on now and there is plenty of more upside for Gold. Why? It comes down to the charts.

From a technical perspective, Carter sees a handful of potential patterns in play with Gold including: an inverse head-and-shoulders, cup-and-handle, and large multi-decade wedge. Let's dive into each scenario.

An inverse head-and-shoulders, or a head-and-shoulders bottom, is an inverted head-and-shoulders top used to predict reversals in down trending asset. Carter points out this pattern's symmetry and states "there is a lot of tension building here that wants to resolve to the upside."

A cup-and-handle is a price pattern where the cup is in the shape of a "U" and the handle has a slight downward drift. This pattern is usually associated with bullish accumulation and an eventual breakout. Carter notes "all this points to a resolution higher despite the recent strength we have been seeing."

Wedges form when the action of an asset move within a narrowing range. As the pattern completes, and the price breaks out, it is usually in the opposite direction the wedge was pointed. This chart is the most long-term view of Gold presented. It is a clearly defined setup with a lot of tension building. Carter mentions how we are "just now breaching the trendline from the all-time-high peak in 2011." 

One of the more interesting charts Carter brought to the segment was Gold Relative to an Equal Weight Commodity Index. This has been trending higher for the last ~15 years and is near an important breakout at ATHs. A breakout here would set sights on Gold being a potential best performing Commodity going forward.

In closing, Carter touches on Gold and the Dollar relation - "it's important to note that the Dollar has been a little slumpish and one could say that's why Gold has been outperforming but there are great periods of time where the currencies and commodities are not inversely correlated. I think Gold has its own momentum now and is setting up for higher prices with potential problems for stock prices and the economy."

You can view the full video here.