When speculative sentiment takes over an asset, nothing can stop it. One such asset in a grip of a buying mania is gold.
The yellow metal has soared into multi-year highs this week, thus affirming my recent bullish assessment a few days back. Prices have conquered the $1,400 resistance with reasonable ease. Two factors have propelled the asset: Expectations of a rate cut by the Fed and geopolitical tensions (e.g., Iran).
However, as prices near $1,450 some technical consolidation is not to be discounted. Gold’s explosive rally is overbought and might be due for a minor consolidation. The month-long rally from $1,280 is equivalent to the one from $1,180 to $1,340 – but in comparison, that advance took nearly five months.
Due to gold’s rally, precious metal miners are also soaring. The Van-Eck Gold Miner ETF (GDX) has gapped up four times over the past month through multiple resistance level (see below). Volume is supportive of its breakout. A further advance is expected; watch to buy on setbacks.
A related question now is: Will gold’s rally pull other metals up such as Silver? At the moment, silver and platinum are both looking relatively weak. Thus, there could be some potential for a ‘catch up rally’ further down the road if gold’s advance persist (see below).
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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.