Analyst: Gold Prices Haven’t Peaked, May Need New ‘Spark’ For Next Run
In a recent interview, Jim Wycoff, a senior market analyst for Kitco, gave his insights on the gold market in the coming months and where he sees gold prices headed.
Wycoff was asked about gold’s recent slump after climbing above $2,000 an ounce. To this, he said it is likely due to August being a slow month in the markets. The gold market taking a breather after the recent run-up in prices may have contributed as well.
“I think there are several things that have prompted the sideways price action in the gold market the past few weeks, first of all you had much of Europe on vacation during the month of August and trade in markets typically slows during that time frame and including the precious metals and maybe in the financial markets. Secondly, we have seen just a pause in a longer-term price uptrend, and this pause is not bearish, it’s not unusual, it’s just markets don’t go straight up or straight down and we’re seeing just a bit of consolidation,” said Wycoff.
What Can Cause Gold Prices to Rise?
He added that he also believes it’s possible that all of the bullish catalysts for gold have been factored into the price. Also, it will need a “fresh spark” to push prices higher.
“Finally I think the gold and silver markets they may have factored into prices on a near-term basis all of the bullish fundamental factors that were driving them higher and now they might need a fresh spark, such a geopolitical event, maybe some new stimulus from the Federal Reserve, something like that. But I do think that prices have not peaked, I think on a long-term basis you are still going to see higher prices.”
Wycoff added that with September and October historically being bad months for the markets, that could help push gold prices higher.
“We’re seeing some more clarity in the outside markets that are important to gold. We’re seeing some higher volatility in the stock market, the months of September and October are historically unkind to the stock markets, that could be a catalyst that could boost gold prices higher here in the near term.”
On Dollar Rebounds
He does caution that as the US dollar rebounds, it also puts downward pressure on gold prices.
“On the negative side we’ve seen the US dollar rebound a little bit just recently and that’s put a little bit of pressure on gold. So I think we are going to see more active markets in general the next couple of months and that’s going to make gold and silver more active themselves.”
When asked about the unusual action recently where gold prices and the stock market move in tandem, Wycoff said he doesn’t have a good answer.
“That is unusual, and I’ve had people ask me that question before and I don’t really think there’s a good answer. On any given day it’s perplexing to gold market traders. You look at historical price action, for example, just recently when the stock market sold off sharply, you would think that might cause some anxiety and some flight to safety into the gold market, didn’t happen. A few months ago when we saw the stock markets rallying on some bargain hunting, you saw the gold market rallying too. So I can’t explain that, I don’t think anybody really can, it’s just the way the market is at present.”