Are The Pieces In Place For Gold To Push Above $1,360?
(Kitco News) - A sharp drop in the The S&P 500 Tuesday is breathing some life into gold as investors continue to wonder if and when the yellow metal will break above key resistance on the back of higher volatility.
Some analysts have said that conditions are ripe for gold to rally above $1,360 an ounce, which is a critical resistance level according to many investors.
Bill Baruch, president of Blue Line Futures, told Kitco News in an interview that gold should break the $1,360 an ounce ceiling within the next four to six months.
“I think it is going to happen before August,” he said. “If you look at the backdrop; geopolitics, trade war, and the weakening dollar, I believe it’s going to happen in due time.”
However, Jeff Christian, managing partner of CPM Group, told Kitco News that more substantial tensions on the geopolitics front and a stronger selloff in equities are needed to push gold higher in the near to medium term.
“We think that what it’s going to take for gold to move out [of its range] is a much more forceful and clear downward move in the stock market, higher interest rates, and greater concern for economic growth prospects, both in the United States and in other countries,” Christian said.
Gold has been range-bound since early 2018, testing lows of $1,320 an ounce, and highs of $1,360 an ounce. June gold futures settled Tuesday in the middle of its range at $1,333 an ounce.
The rally in gold comes as the S&P 500 has dropped 1.5% on the day, last trading at 2,310 points. The Dow Jones Industrial Average has seen an even sharper decline, falling 2%, last trading at 23,964 points.
According to Mike McGlone, senior analyst at Bloomberg Intelligence, gold hasn’t traded in such a narrow range since 2005, and is at “risk of sharp rallies.”
“There's little to prevent a sharp rally in range-bound gold, in our view. The precious metal generally shines vs. dollar weakness, increasing inflation and bottoming stock-market volatility,” McGlone said in a recent Bloomberg Intelligence report.
Renewed momentum in the U.S. dollar and rising bond yields are helping to keep the gold market in check. The U.S. dollar has seen renewed strength this past week on the back of higher interest rates, as U.S. 10-year treasury yields approached 3% on Tuesday for the first time since 2014.