This article was originally published on The Chart Store Observation area for subscribers on August 23, 2004.

We pointed out in our July 21 Observation on crude oil that we like to look at commodity charts drawn with "real" prices. For this Observation we are going to highlight charts of nominal and "real" gold prices.

The following chart is a look at the "nominal" price of gold since 1970. The all-time high was $850/oz. in January, 1980. The horizontal line around $430/oz. has been the "roof" on the price since 1990.

The following chart shows the "real" price of gold adjusted by the Consumer Price Index. The all-time high of "real gold" in January, 1980 equates to about $2,070/oz in current dollars.

The following chart of both nominal (blue line) and "real" (orange line) gold prices is drawn from 1982.

Chart 3 Notes

• The orange trendlines have contained all price action of "real" prices since 1982.
• Both the nominal price and the "real" price have formed what technical analysts would call a long-term base in the form of a saucer which we represent on the chart by the black line.

Summary points:

• The saucer pattern of price action of both the nominal and "real" price of gold represents a multi-year consolidation and bottoming formation.
• The upper orange downtrend line of "real" prices is slightly above current levels.
• A period of sideways price action (a handle) might set the table to break above the downtrend line and old resistance at approximately $430/oz.