Make Kitco Your Homepage

Can Gold Hold Above $1,300 As Fed Approaches?

Kitco News

(Kitco News) - Even with gold prices stabilizing on Wednesday, a slide toward $1,250 is not ruled out just yet, according to one technical analyst.

The yellow metal has been stuck in a tight trading range this year and has recently been trading below its 50- and 200-day averages, Louise Yamada, managing director of Louise Yamada Technical Research Advisors, told CNBC on Tuesday.

“[Gold] has been in a range between $1,300-$1,400, with $1,200 underneath, and if we can’t hold here and we break the uptrend there is a possibility that the price could slide toward $1,250 over the next several weeks,” Yamada said.

This could be the third year in a row that gold fails to break above the $1,365 level, Yamada added.

“The rallies have failed at resistance around $1,365 in 2016, 2017, again in 2018,” she said. “We've sort of been talking about these rallies as rallies in a bear market from the 45 percent decline we've seen since 2011. Now the price is tickling, possibly breaching the 2016 uptrend.”

Strong equity markets have been putting some additional downward pressure on gold these past few months and that is not about to change, Yamada pointed out, adding that the path of least resistance for gold is down.

“When stocks are in a bull market, gold underperforms, and when stocks are in a bear market, gold tends to outperform,” she said. “I don't think until we see the equity market actually turn into something significantly more bearish that we are going to see much on the upside in gold, so I think the path of least resistance appears down.”

Kitco’s senior technical analyst Jim Wyckoff also pointed out on Wednesday that stocks remain a bearish force for gold prices.

“World stock markets were mostly firmer overnight and U.S. stock indexes hit 2.5-month highs again today, as traders and investors are in upbeat, risk-taking moods at present,” Wyckoff said in his PM Roundup.

The Dow Jones Industrial Average finished the day up 1.4%, the S&P 500 up 0.86% and the Nasdaq up 0.67%, with the latter reaching a record closing high for the third straight day in a row, finishing at 7,689.24.

When Asian markets opened early Thursday, spot gold on Kitco.com was trading at $1.296.70, up 0.07%, while August Comex gold futures were last at $1,301.80, up 0.03% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Follow Kitco News