The gold price market technicals and fundamentals are aligned in here.
The precious Yellow metal is up about 17% YTD, and that is up nearly 28% from this time last year. With prices back at $1,513 oz, some investors and market watchers are back to looking for Northside marks at $1,800 – 2,000 oz, and some including me are looking at scenarios that could drive gold further North.
During a major run of any commodity or index, it is not that unusual for Bullish calls to continue to get even more Bullish. The softening or end to the US-China trade war, continued geopolitical issues around the globe, ever lower US interest rates, some $14-T or so in negative interest rate bonds and debt between Europe and Japan, gold seems to be back as everybody’s favorite safe-haven commodity.
In the Merrill Lynch RIC Report for August, commodity strategist Michael Widmer makes a case for gold to reach $2,000 oz.
Mr. Widmer argues that successive rounds of monetary easing’s side effects include higher gold prices. Successive rounds of easing also have delivered less meat to the economy, and financial markets seem to be much less enthusiastic about further stimulus. There are also other issues to look for that may be positive for gold stocks
A Key issue that was brought up was quantitative failure. This is when markets refocus on elevated debt levels or the lack of global growth, which likely would lead to a material increase in volatility.
If central banks start to ease more aggressively, gold becomes an even more attractive asset. The Merrill Lynch 1-year forecast for gold actually is still at $1,500 oz, but there is a stronger case laid out where $2,000 is viable.
As far as the charts on gold, Merrill ‘s technical strategist Paul Ciana believes that an impulsive breakout for gold is Bullish in the medium term and the current price action confirms an uptrend in gold prices is underway.
Over the long term, Mr. Ciana even sees the possibility of a multiyear uptrend that could even take the price of gold up to $2,000 – 2,300 oz. If gold were to fall below a Key trend line back to a 200-Wk MA at $1,300 and down to $1,260, then there would be concern that a Bear trend formed, but gold is more than $200 above that mark now. Stay tuned…
Have a terrific weekend