Is the bottom in? Gold could see a bullish correction, bouncing off $1,700 - Moor Analytics
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(Kitco News) - Gold drop from its March highs at $2,000 an ounce did a lot of technical damage and pushed gold into a downtrend; however, according to one technical analyst, the precious metal could be on the verge of establishing a new short-term bull move.
In a recent interview with Kitco News, Michael Moor, founder of Moor Analytics, said that gold's consolidation of around $1,700 an ounce in recent days could indicate the market's bearish momentum has run its course.
He noted that gold has held critical technical exhaustion levels just below $1,700 an ounce.
"With this year's selloff, we have violated every bull trend, so where the market stands now, the bias is still bearish. Still, we could see a bullish correction in the near-term," he said.
Moor added that it is a little too early to determine if a bullish correction has the potential to reserve the current trend. He said that one signal he is looking for is to see if gold prices can get back above $1,800 by mid-August.
Moor also said that although gold has struggled through most of the year, it can still make a run back to the highs above $2,000 an ounce if $1,700 holds as support. He said the fundamental price to watch would be around $1,850 an ounce.
"If gold got above $1,850, that would take out another major bearish pattern and you'd already be above a bullish pattern. To me, that would signal that there is a good likelihood of this taking a run to the highs again," he said.
However, on the downside, Moor warned that if gold prices fell below $1,686, the precious metal could see further sharp losses.
"The next really significant exhaustion level is down by $1,564.3 ounce," he said.
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As to how to play the current gold market, Moor said that investors should look at taking a more conservative trading approach, building a position and taking some profits on a rally to resistance points. He added that he sees initial resistance around $1,789 an ounce.
"When gold comes down to these exhaustion levels, you want to buy and then in the first wave sell a part of your position. That pays for the equity and the other half of the position," he said. "As the market breaks each bullish formation, you can add to your core position."
Moor's near-term bullish outlook comes as gold prices continue to hold support at around $1,700 an ounce. August gold futures last traded at $1,709.20 an ounce, up 0.5% on the day.