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 breathingsome life into gold as investors continue to wonder if and when the yellowmetal will break above key resistance on the back of higher volatility.
Some analysts have said that conditions are ripe for gold torally above $1,360 an ounce, which is a critical resistance level according tomany investors.
Bill Baruch, president of Blue Line Futures, told Kitco Newsin an interview that gold should break the $1,360 an ounce ceiling within thenext four to six months.
“I think it is going to happen before August,” he said. “Ifyou look at the backdrop; geopolitics, trade war, and the weakening dollar, Ibelieve it’s going to happen in due time.”
However, Jeff Christian, managing partner of CPM Group, toldKitco News that more substantial tensions on the geopolitics front and astronger selloff in equities are needed to push gold higher in the near tomedium 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 stockmarket, higher interest rates, and greater concern for economic growthprospects, 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 settledTuesday 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 hasseen an even sharper decline, falling 2%, last trading at 23,964 points.
According to Mike McGlone, senior analyst at BloombergIntelligence, 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-boundgold, in our view. The precious metal generally shines vs. dollar weakness,increasing inflation and bottoming stock-market volatility,” McGlone said in arecent Bloomberg Intelligence report.
Renewed momentum in the U.S. dollar and rising bond yieldsare helping to keep the gold market in check. The U.S. dollar has seen renewedstrength this past week on the back of higher interest rates, as U.S. 10-yeartreasury yields approached 3% on Tuesday for the first time since 2014.
By David LinFor Kitco News
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