Gold’s Stair-Step Pattern

Gold prices are making a repeating stair-step pattern of movements as gold trends higher.  Each part of this sequence sees a multi-month up move after breaking out to higher highs, then another multi-month consolidation of those gains. Right now gold is in a consolidation phase.

This week's chart shows our Proportional Price Oscillator, which is a variation on the classic McClellan Price Oscillator.  The Price Oscillator which my parents developed back in 1969 is similar to the McClellan A-D Oscillator, which measures the difference between two EMAs (10% Trend and 5% Trend) of the daily A-D difference.  The math is the same for the Price Oscillator, but using closing prices in place of that A-D difference.

Sherman and Marian McClellan were the first to do this mathematical trick of finding the difference between two moving averages, as opposed to just looking at each moving average on its own.  In 1977, the late Gerald Appel adapted this technique to create what he called Moving Average Convergence and Divergence, or MACD.

The Proportional Price Oscillator (PPO) goes one step further, dividing the Price Oscillator by the closing price (and then multiplying by a constant to get to normal sized values).  Doing this helps to normalize what would otherwise be expanding amplitudes of Price Oscillator values owing to higher price levels over time.  The PPO is thus better for longer term chart evaluations, especially if there has been a big change in price levels.  I was the one who innovated this change to the Price Oscillator back in the 1990s, and since then platforms like StockCharts.com have added PPO to their arsenals of indicators you can use.  By adjusting the Price Oscillator for higher price levels, the PPO is therefore equivalent to the Ratio-Adjusted Summation Index (RASI) for A-D data.

I am including the PPO for gold futures in this week's chart in order to make an important point about gold's stair-step pattern of surges and consolidations.  What we are seeing during the consolidation phases is that the PPO works its way back down to near the zero neutral level, which helps reset the gold market to a nice equilibrium state, the better to support the launch of the next ascending phase.

That is important right now because gold's PPO has only made it partway down to neutral, which implies that there is more consolidative work to do.  And this sideways period has only been underway for 2 months, since the Oct. 20, 2025 all-time price high.  Prior consolidation phases have lasted 3-5 months.  There is no mandate that it has to happen exactly the same way this time, but this pattern seems to be repeating nicely so it would be strange if we got a different behavior this time.

Along the way, it is quite possible that we can see gold prices make an incrementally higher price high, as it tries to convince everyone that the next breakout is starting.  Then after a few months, when traders finally give up hoping for a legitimate breakout move, the real one can start.