Gold prices are forming a repeating stair-step pattern as gold trends higher. Each step consists of a multi-month advance following a breakout to higher highs, then another multi-month consolidation of those gains.

Right now, gold is in a consolidation phase.

The following chart shows our Proportional Price Oscillator (PPO), a variation of the classic McClellan Price Oscillator. The Price Oscillator, which my parents developed back in 1969, is similar to the McClellan A-D Oscillator. That indicator measures the difference between two exponential moving averages—the 10% trend and the 5% trend—of the daily advance-decline (A-D) difference. The math is the same for the Price Oscillator, but it uses closing prices in place of that A-D difference.

Source: McClellan Financial Publications

Sherman and Marian McClellan were the first to apply this mathematical trick of measuring the difference between two moving averages, rather than 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 by dividing the Price Oscillator by the closing price and then multiplying by a constant to get to normal-sized values. This adjustment helps 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 introduced this change to the Price Oscillator in the 1990s, and platforms like StockCharts.com have since added the PPO to their indicator toolkits. 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 to make an important point about gold’s stair-step pattern of surges and consolidations. During consolidation phases, the PPO typically works its way back toward the zero, or neutral, level. This process helps reset the gold market to a nice equilibrium state—the better to support the launch of the next ascending phase.

That point is important right now because gold’s PPO has only moved partway down to neutral, suggesting that additional consolidation may still be needed. And this sideways period has only been underway for two months, since the Oct. 20, 2025, all-time price high. Prior consolidation phases have lasted three to five months. There is no mandate that this pattern repeat in exactly the same way, but it seems to be doing so nicely, so it would be strange if we got a different behavior this time.

Along the way, it is quite possible that gold prices could 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.

This is an edited version of an article that first appeared at McClellan Financial Publications on Dec. 11, 2025.

The opinions expressed in this article are those of the author and the sources cited and do not necessarily represent the views of Proactive Advisor Magazine. This material is presented for educational purposes only.