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Gold price pushes above $1,600, what's next?

Kitco News

Editor's Note: The article was updated to include more comments from analysts.

(Kitco News) - For a lot of analysts it was only a matter of time before gold prices breached $1,600 an ounce and with that target achieved, those professionals say that the precious metal has room to run a little further.

Gold price have been climbing steadily higher Tuesday as fear sentiment picked up after investors saw the impact the spreading coronavirus was having on the global economy. Overnight, Apple warned that earnings won t meet guidance for the first quarter. The tech company said that production and sales have dropped because of the coronavirus.

The gold market has just been waiting for a big name to crack to push price higher,” said Phillip Streible, chief market strategist at Blue Line Futures.

Streible added that if feels like sentiment in equity markets is starting to shift and that will continue to support gold prices. The comments come as April gold futures rally more than 1% on the day, last trading at $1,604.30 an ounce.

Streible noted that valuations in equity markets have been unaligned with reality for a long time and a potential correction could be significant.

As for how high gold prices can go, Streible said that he is looking at initial resistance at $1,620 with his next target at $1,650.

In the near-term, s senior technical analyst Jim Wyckoff said that he is watching initial resistance at $1,619.60 an ounce, which was the seven-year high hit in January. If that is breached on the upside it would open up another solid leg up in prices,” he said.

Bart Melek, head of commodity strategy at TD Securities, said that he is also bullish on gold, reiterating the firm’s target at $1,700 an ounce.

However, in the near-term Melek said that he is watching resistance at $1,614 an ounce and at $1,632.
“The Apple news is not going to be the only bad report out there. We are going to get more weak data and that will force markets to price in more rate cuts from central banks,” said Bart.

“We are going to see more equity volatility and more uncertainty,” he said. “I suspect that that if needed central banks and even governments will be ready to pump liquidity into markets to support economic growth and that is going to be good for gold.”

Even after Apple’s announcement, many economists have noted that the full impact of the coronavirus is still unknown. Currently, more than 73,000 people around the world have been infected and more than 1,800 have died.

Colin Cieszynski, chief market strategist at SIA Wealth Management, said that with gold’s new breakout, the yellow metal can push to between $1,670 and $1,680.

He added that he is watching to see how the coronavirus impacts the global economy and how central banks react to any potential weakness.

“Gold and the coronavirus is not about money flows. It more than just the daily shifts between fear and greed,” he said. “The fact is that because of the impact the virus is expected to have on economic growth, it will be difficult for any central bank tighten monetary policy.”

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