Gold is going to $2,500 so buy the dips - Blue Line Futures
The gold market is stuck in a channel as it tries to hold its ground around $1,750 an ounce; the spark that could ignite the next phase in the precious metal's rally could be just around the corner, according to Phillip Streible, chief market strategist at Blue Line Futures.
In an interview with Kitco News, Streible said that momentum in equity markets is providing some competition for gold; however, he added that this enthusiasm could prove to be misplaced.
"The federal reserve is propping up all U.S. equities and the prices of most assets right now. That's causing this, this fear of missing out in the equities," he said. "The reality is: on the equity side, earnings are going to continue to fall. A safety value play will come into effect and that's where gold prices really take off because the fed is completely handcuffed right now."
Streible said that the Federal Reserve is running out of options to continue to prop up the equity markets. He added that although the U.S. central bank won't introduce negative interest rates, markets will continue to price in this scenario. This is the environment that will push gold higher in a long-term bull market, he said.
Streible reiterated his call for gold prices to push to $2,500 an ounce, with prices taking off in 2021.
However, Streible added that investors need to be patient and wait for dips to get into the gold market.
"Gold futures will actually decline just a bit, I think, in the third quarter. That's where your value is. You need to be looking at buying these dips," he said. "Once we come into the fourth quarter and actually realize that the earnings are not coming back as soon as possible and that the Fed is going to continue to support that's when it's game over. That's when [gold] starts to take off.
Looking at silver, Streible said that he is optimistic that prices will follow in gold's slipstream; however, he added that it is a problematic trade as some investors are focused on weak industrial demand.
"If silver decides it's going to be this manufacturing commodity, this industrial production commodity, it's going to get hit," he said.