The Price Of Gold Made History Again But Is This The Last Of The Bull Run?
Gold prices reached a high of $2,089.20 on August 7th marking yet another historic move for the precious metal. Given this as the case, however, are cracks beginning to show in the bull run?
Shortly after 9AM EST prices began crumbling and fell to lows of $2,024.80 by lunch. Even with a reversal late in the day, gold still couldn’t manage to retest those highs. This is the first red close of more than 1% the precious metal had in over a month. Does this mean that the gold rally is over and investors should shift the focus?
Not necessarily but some analysts are expecting a correction. The main reason behind it aside from surging prices are what charts have started showing:
We can clearly see that even on a simple level, not getting to complicated with tons of indicators, Gold has been “Overbought” since late July. Even with today’s move and a swift drop in RSI value, indicators continue to signal gold prices are hot right now.
Furthermore, it’s even more clear to see that gold prices cracked on Thursday. Whether that’s the start of a correction or early signals of a bear market beginning are yet to be seen. However, I think the former is more likely right now. Citi economists say gold could reach $2,100 an ounce this quarter, and $2,300 in the next six-to-12 months. There are doubts it would hit $3,000 however.
“The monetary theory of inflation has been replaced by labor and product market micro theories, and market pricing of inflation risk is low. So Gold is not presaging inflation.”Economist Catherine Mann
Is There A Gold Trade In August?
According to CNBC, The economists said that while some have suggested gold’s rise traces the depreciation of the dollar, “no other currency or country is ready or willing to take on the dollar’s role.”
So is there actually a gold trade right now considering the overbought situation? Guy Foster, head of research at Brewin Dolphin explained it on Sqwak Box recently. “The trade here is to say that the Federal Reserve and other central banks will not be able to raise interest rates because of high unemployment, even as inflation starts to pick up.”
Even if gold ends up pulling back, which many feel it could, the case for new all-time highs hasn’t diminished. Very robust investor interest in the precious metals is keeping the rally alive, while the macro drivers are all intact to keep the upward price momentum going according to some analysts.
“Gold did poke its nose above upper end of the uptrend channel happening in gold since March but not by much. A correction is coming but as long as we have uncertainty about the virus, nobody can say we’ll have this all sorted in the next six months. This time around we have the forces of nature to deal with,” said StoneX analyst Rhona O’Connell.
On the flip side, some analysts have identified that gold is hot yet still see the uptrend continuing longer. “Normally I would say [the bull run is overheated] but what I’m seeing in the daily action is that gold is rising in a very measured way and is not meeting much resistance, so when that’s happening you just step out of the way and let it go, that’s what you do,” said E.B. Tucker, director of Metalla Royalty and Streaming. Where do you stand on this topic right now? Is gold set to head higher? Does the precious metal pull back before making new highs? Or is this finally the top for gold in 2020?
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