Key Catalysts to Watch as Gold Looks Beyond $1,400


Jun. 21 2019, Updated 11:45 a.m. ET

What’s next after $1,400 for gold?

After touching the $1,400 per ounce mark, gold prices have taken a breather. However, there are many factors that are supporting gold and could keep it elevated going forward.

In Why Paul Tudor Jones Thinks Gold Could Go to $1,700 Soon we discussed that Jones’ favorite pick in the next 12 to 24 months is gold. He thinks that if gold hits $1,400 per ounce, it will quickly move to $1,700. While such a move might seem like wishful thinking right now, if gold prices can sustainably extend the bullish pattern above $1,400 in the long term, we might see a huge upside. Gold prices have remained range-bound for the last five years and if they do push past this range, there is a major upside to be had from holding gold.

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Smart money betting on higher gold prices

Big investors are also betting on gold breaking out from these levels. A large factor driving that is the expected weakness in the US dollar (UUP). Jeffrey Gundlach, for example, is bullish on gold as he expects the US dollar to end the year lower.

Accumulate gold on dips

Another important thing to note here is that gold is outperforming stocks even when stock markets are making highs. The SPDR Gold Shares (GLD) has gained 8.7% in the last one month, and the VanEck Vectors Gold Miners ETF (GDX) has amplified that return by rising 21.1% in the same period. In comparison, the S&P 500 (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite (QQQ) have returned 4.2%, 4.4%, and 4.9%, respectively. This outperformance by gold is also a bullish signal for the gold price outlook. Investors should keep an eye on the Trump-Xi meeting on the sidelines of the G-20 Summit, which could provide the next big catalyst for gold.

Investors should note, however, that breaking out above $1,400 per ounce doesn’t mean that it is going to be a one-way march higher for gold prices. The SPDR Gold Shares (GLD) and the VanEck Vectors Gold Miners ETF (GDX) are currently trading at the 14-day RSI (relative strength index) of 85.9 and 90.0, respectively. An RSI level of above 70 indicates that it could be in overbought territory, so we might see a slight pullback in gold prices. In fact, investors might like to accumulate gold when it breaks to the downside to take advantage of lower prices.

You can also read Could Gold Be the Best Bet amid Uncertainty?


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