Don’t be fooled by recent trading. While the gold bulls have had their wings temporarily clipped due to a stronger U.S. dollar, there’s a time limit on how long this scenario will continue says one metals strategist.
DeCarley Trading co-founder, Carly Garner’s latest analysis points to a loosening of Federal Reserve policy before the end of the year. This action alone would be enough to unsettle the greenback and send it into reverse, creating space for gold prices to renew their own upwards trajectory.
Garner expects that the dollar index will lapse to around 99 points – a level which would see the dollar propelled back towards levels not seen since the 1990s. Should that happen, we can expect gold prices to rise stratospherically. Coinciding with the decline in the dollar index, Garner also expects bond yields to run out of gas following a strong four-month run.
If you’re looking to buy gold, it will pay to keep a very close eye on the dollar index. Garner says, “If we break below that support level [99 points], we are probably going back towards the mid-nineties and if that’s the case, that’s a game changer for gold.”
You’ll want to move fast if the gold index shows even the slightest side of declining to that level she advises, stating, “Suddenly, we are not looking at £1,602 ($2,000) gold but new all-time highs.”
Couple that with the inevitable end to the high bond yields seen over the last few months and the gold bulls will be able to fly. “We are basically sitting on the biggest net short in bonds on record and at some point, that is going to unwind itself. This trade will be unwound and that is going to push interest rates lower. When positioning is this extreme, it’s just a matter of time,” Garner forecasts.
What’s notable about this analysis is that neither the persistently strong bond yields nor a stronger U.S. dollar in the wake of the most recent Federal Reserve symposium have had a notable impact on gold prices. The yellow metal has held steady against the challenge with prices sticking firmly above £1,521 ($1,900). This creates an incredibly favourable launch pad for the bulls to make a run for new all-time highs.
Don’t wait for prices to rise. Buy now to maximise your advantage before we see a new price record set.
