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What Will It Take For Gold To Reach $1,700?

By Investing.com (Barani Krishnan/Investing.com)CommoditiesFeb 26, 2020 12:43PM ET
www.thechinesenews.net/analysis/what-will-it-take-for-gold-to-reach-1700-200510754
What Will It Take For Gold To Reach $1,700?
By Investing.com (Barani Krishnan/Investing.com)   |  Feb 26, 2020 12:43PM ET
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Short sellers in stocks weren’t the only ones celebrating when the “most-hated bull market in history” was coming apart on Tuesday. On the other side of the aisle, gold was also getting hammered, delighting naysayers who’d warned that everyone’s favorite safe-haven could crash too.

It’s one thing when a stock market that has rallied beyond a decade melts down on worry that the coronavirus could soon be coming at the United States like never before — the Centers for Disease Control and Prevention said on Tuesday it’s a matter of when, not if, for the Covid-19 to become a U.S. pandemic.

But it’s another thing to see one of the most popular hedging tools used by investors against that health crisis falling along with other markets, when logic dictates that it should rise. Gold’s near 2% loss on Tuesday — coming after the Dow, S&P 500 and Nasdaq all slumped almost 3% each — appeared to cast the yellow metal out like any risk asset.

Gold Futures Weekly Chart
Gold Futures Weekly Chart

Gold Was “Off The Charts,” Reversal Necessary

Gold’s slump came after analysts at TD Securities noted that longs in the yellow metal had entered new territory of “dry-powder positioning,” which it said was “off the charts” and could trigger a reversal.

“The risk of a near-term pullback is as high as it's ever been,” the analysts at TD Securities cautioned.

Yet, some view Tuesday’s retreat as a necessary pivot for gold, that allowed it to pause sharply the first time after a three-week run-up with few interruptions. That rally had tacked some $115 on the market and lifted it to seven-year highs that saw gold futures peaking at $1,691 per ounce and bullion at $1,689.

In Wednesday’s Asian trade, U.S. gold futures hovered at $1,645 — not far from where it settled the previous day but back in the green.

Latecomers To Gold Party Shaken Out

Analysts say the previous day’s breakdown shook out most of the latecomers to the gold party — particularly those who belong to the “FOMO,” or Fear-of-Missing-Out crowd.

Now, technically strengthened, the yellow metal looks poised to take on the target that really matters next to the remaining longs in the market — $1,700.

“A large amount of fast money was going long at the top on Monday morning, only to have spent most of yesterday being squeezed out to the downside,” Jeffrey Halley, analyst at OANDA, said, observing the action in gold over the past 48 hours.

He adds:

“The culling of the FOMO traders, while pleasing, appears to have run its course. We may well have seen the lows for gold for the week now, as fundamentals reassert themselves. The landscape is undeniably positive for gold as stocks and yields fall and worries about global growth persist.”

So, what do the technicals tell now of gold and its attempt toward $1,700?

“Gold prices appear to have found initial technical support around the $1,635 level and 23.6% Fibonacci retracement of the commodity’s most recent bullish leg,” said Rich Dvorak, a technical analyst for both currencies and precious metals. “This area may have potential to keep bullion buoyed going forward before a retest of the $1,600 price level might be considered.”

$1,700 In View; Getting There Takes Work

But if gold doesn’t succumb to another selloff, then its immediate challenge would be the near-side technical resistance of $1,660, said Dvorak.

“If it can top around $1,660, gold might look poised to continue pressing higher toward the $1,700 handle, before 2012 highs come into focus."

Analysts at Eagle FX say gold’s hourly chart bears heavy watching for the trends and pitfalls in its path toward $1,700.

“While the recovery from the overnight low of $1,625 is encouraging, the metal is yet to challenge the falling channel resistance at $1,647,” the brokerage said in a note, referring to early Wednesday’s moves in Asia.

“An hourly close above that level would imply an end of the pullback from recent highs near $1,690, and would shift risk in favor of a rise to $1,660 (a lower high on the hourly chart).”

What Will It Take For Gold To Reach $1,700?
 
What Will It Take For Gold To Reach $1,700?

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Comments (18)
jerrold minyard
jerrold minyard Feb 28, 2020 2:38AM ET
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$GOLD is headed for a reversal. $$1200oz could be support. 🤑
Herowain Herman
Herowain Herman Feb 27, 2020 2:51PM ET
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Barani Krishnan - thank you for an informative article. I always enjoy reading your articles.
Venu Gopal
Venu Gopal Feb 27, 2020 4:54AM ET
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gold its up todays
Matt Novakovich
Matt Novakovich Feb 26, 2020 11:51PM ET
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so you're going out on a limb and saying it will either go up, down, or stay the same!?!?! Risky article man, risky
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Dittharach Jindarak
Dittharach Jindarak Feb 26, 2020 11:51PM ET
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Hahahah he answered not bot article
Matt Novakovich
Matt Novakovich Feb 26, 2020 11:51PM ET
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fair enough. Good data you present. I could have a future time machine and I would still pick wrong
Matt Novakovich
Matt Novakovich Feb 26, 2020 11:51PM ET
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you present good data with good historical charts. My problem is I could have the future news and I still can't predict what Gold or oil is gonna do
Barani Krishnan
Barani Krishnan Feb 26, 2020 11:51PM ET
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Dittharach Jindarak  Again, I'm not responsible for your position-taking. Feel free to consult a relevant CTA for that. I reiterate that my goal is to share as much information as possible on any market I write about.
Barani Krishnan
Barani Krishnan Feb 26, 2020 11:51PM ET
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Matt Novakovich  Thanks, Matt. Given the sheer uncertainty across markets, it is a difficult call. Though uncertainty itself should benefit gold, as it is doing today :)
Lucke Black
Lucke Black Feb 26, 2020 2:26PM ET
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It will take end of contract printing. Then GOLD and SILVER can fly
Cheah Ks
Cheah Ks Feb 26, 2020 1:23PM ET
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if look at 1week chart it look like the handle of the cup, may see a breakthrough after 10 March
Deepak Sharma
Deepak Sharma Feb 26, 2020 11:29AM ET
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Gold May start rising after 10th March. Technically overbought so entering range bound with downward bias but after 10Mar it will shoot up again
Heine Pedersen
Heine Pedersen Feb 26, 2020 10:17AM ET
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Wall Street found a cure..
Barani Krishnan
Barani Krishnan Feb 26, 2020 10:17AM ET
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Indeed. The "Trump cure" :)
Omar Alawi Bafakieh
Omar Alawi Bafakieh Feb 26, 2020 10:02AM ET
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Tacmarkets
Graham Smith
Graham Smith Feb 26, 2020 9:54AM ET
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What a bunch of tripe, amateur article for amateurs
Barani Krishnan
Barani Krishnan Feb 26, 2020 9:54AM ET
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Let's hear YOUR superior take on the market then :)
Matt Novakovich
Matt Novakovich Feb 26, 2020 9:54AM ET
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my take is this, and trust me I've been punished hard by First Magestic and Coure Mining over the last 4 years... I think the "safe haven" buying has already occurred by savvy investors. when the market crashes, people wont be looking to buy metals, cause they have already spent the 40% trump proceeds. Most I know have already bought bigger houses, cooler cars and more vacations. I always was aghast when the Junior mining companies went down on the last few market crashes. and bam! I realized, what I said above... Everyone is losing money, in margin and putting out debt fires. last thing they're doing is buying metals. I just rode CDE the past two months from 8 to 5 50 and just sold for a loss today. now it will probably go up... until then , I've gone all in on oil. With me good luck, ugh. .
Gods Money
Gods Money Feb 26, 2020 9:38AM ET
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We will hit $1,700 by Monday.
Jose Emenis
Jose Emenis Feb 26, 2020 9:38AM ET
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Will hit $2,000 when the number of coronavirus victims in America surpasses 5,000.....
Matt Novakovich
Matt Novakovich Feb 26, 2020 9:38AM ET
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But... only bullion will go up. our mining stocks will be in the toilet for a good 6 to 9 month
Phil Poon
Phil Poon Feb 26, 2020 9:37AM ET
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it takes the street to be bearish !
Barani Krishnan
Barani Krishnan Feb 26, 2020 9:37AM ET
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Someone is tweeting determinedly to ensure the WS rally doesn't die :)
Jose Emenis
Jose Emenis Feb 26, 2020 9:34AM ET
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Yesterday, Kudlow and Trump said that the coronavirus crisis is over.... They want the gold rally to die... and they want the DOW at 30,000 or higher for Trump's re-election propaganda campaign....
Barani Krishnan
Barani Krishnan Feb 26, 2020 9:34AM ET
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That's all that matters to them -- keep the stocks rally going :)
db cooper
db cooper Feb 26, 2020 9:21AM ET
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$ 1700 looking very very unlikely now.
Jose Emenis
Jose Emenis Feb 26, 2020 9:21AM ET
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Wait until coronavirus spreads all over America....
Kristof Naessens
Kristof Naessens Feb 26, 2020 6:19AM ET
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Not much needed to take gold to and over 1700. Yesterday was expiry day for gold.
Barani Krishnan
Barani Krishnan Feb 26, 2020 6:19AM ET
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It has been a valid resistance though the ascent from 1600 to where we're now happened much faster than what it took to go from 1500 to 1600.
Claudio Andretti
Claudio70 Feb 26, 2020 5:46AM ET
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I look forward to reading an article of yours about the Gold/Silver Ratio. Thank you
Barani Krishnan
Barani Krishnan Feb 26, 2020 5:46AM ET
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Claudio, will look at that ratio next. Thanks.
Alex Malmstrom
CoinToss1 Feb 26, 2020 5:05AM ET
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$1700 will probably be reached in July/ August after a 3 month correction period, just like last year, but some gullible people will, of course, believe that the coronavirus is the cause for the bullishness in gold prices; although it's ascent commenced in August 2018- but who looks back, right? It's Dow theory 101, once the financial media starts talking about the positive aspects of any market whilst it is overbought, the market usually turns.
Barani Krishnan
Barani Krishnan Feb 26, 2020 5:05AM ET
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Gold, of course, has its fan base and inherent strength. But like any other asset, it is event-driven. While it may be cool to call the financial media ignorant and and cast aside probable causes like the virus, the media attention and collapse in investor sentiment triggered by the pandemic have combined in bringing gold thus far.
Alex Malmstrom
CoinToss1 Feb 26, 2020 5:05AM ET
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Barani Krishnan  Thank you for your reply. When you say " the media attention and collapse in investor sentiment triggered by the pandemic have combined in bringing gold thus far" seems contradictory, or not? This would prove my point that gold prices are declining because of their overbought status, otherwise, because of the virus, the price of gold should continue to climb up. I don't want to come off as pedantic, but I wasn't quite certain what you meant.
Barani Krishnan
Barani Krishnan Feb 26, 2020 5:05AM ET
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It is a "combination" as I said. The "noise" is, sometimes, as much causal to a market's move as fundamentals, and the media is a good source for that. One reason why the pandemic is this well-known is because of the media. Now, you can call that 24/7 network ad nauseam, yet it's the flow of information that often serves as the lifeblood of markets. Rather than contradicting each other, stats from the pandemic and and the reporting on the sentiment in gold and other assets are in sync.
Alex Malmstrom
CoinToss1 Feb 26, 2020 5:05AM ET
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Barani Krishnan  Once again, thank you for your reply. It was helpful for me to understand the fundamental aspects, something I can't yet quite understand as easily as technicals. I enjoy reading your articles, very informative and concise.
Hue Pham
Hue Pham Feb 26, 2020 4:55AM ET
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I think it hits 1700 around 11 am ET today.
Barani Krishnan
Barani Krishnan Feb 26, 2020 4:55AM ET
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May take a little longer I think.
Corgis in Texas
Corgis in Texas Feb 26, 2020 4:55AM ET
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@Barani Krishnan -when are you expecting that to occur?
Barani Krishnan
Barani Krishnan Feb 26, 2020 4:55AM ET
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Probably next week if Covid impact results in a community infection in the US. This entire move up has been event-driven.
 
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