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This Is The Level Gold Must Breach To Hurt Markets - Piper Jaffray

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This Is The Level Gold Must Break To Hurt Markets — Piper Jaffray

(Kitco News) - There is a level gold can reach that would hurt the stock market, according to Piper Jaffray. And that level is not even much higher than the precious metal’s current trading range.

The next gold rally could weigh on the markets, chief market technician at Piper Jaffray Craig Johnson told CNBC on Friday.

“You've got to get a break above $1,365 specifically to really suggest that gold is starting a new leg higher,” he said. “If we get this break above $1,365, that's going to be a real negative event for the overall market itself.”

Johnson’s comment came as traders rushed into gold last week in search of safe-haven investments amid trade war fears.

Last week, gold prices briefly climbed above $1,350 only to fall back to $1,330 an ounce early this week. As Asian trading opened on Tuesday, spot gold on Kitco.com edged down, last seen at $1.333.50, down 0.13% on the day.

It is not a new concept that gold performs better than equities when fear is present in the markets, Johnson noted, adding that more upside in gold would point to investors being bearish on equities.

“We're supposed to be in a pro-growth environment. We've got the tax cuts put in place, the economy is supposed to be doing better, and then you've got gold moving up? That's a pretty defensive move,” said Johnson. “It would be a pretty negative meaning for a lot of investors if we break above that $1,365 level.”

But, some analysts disagree that current U.S.-China tensions will turn into a trade war.

“For the remainder of the year we expect that trade tensions between the U.S. and China will not escalate into a trade war,” ABN Amro’s senior precious metals and diamond analyst Georgette Boele said a report published on Monday.

Boele added that as trade threats dissipate, gold will suffer, falling to below $1,300 an ounce. “Our end of June is now USD 1,275 while our end of September and end of December forecasts remain at USD 1,250 per ounce,” she said.

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.