Although gold prices have risen nicely this year, market history suggests otherwise. Those expecting further gains will be badly disappointed, according to Ari Wald, technical analyst at Oppenheimer.
“It’s time to take profits in gold,” Wald wrote to CNBC on Monday.
According to the technician, gold’s recent breach of its long-term downtrend brings to mind 1999, when gold rose powerfully in a short period of time to break out of a period of progressively lower prices.
Wald says, “While that certainly set up a better trading environment, it wasn’t off to the races in 1999”.
A similar chart pattern has unfurled itself this time around, he says. He predicts only mild gains at best for the yellow metal in remainder of the year.
Referring to a level just £24.5 above Monday afternoon’s settlement price, he says, “There are signs of selling pressure at £896”.
Still, he’s not exactly bearish on gold, either — pointing to support on the chart just below £840.
But it is the opposite for Boris Schlossberg of BK Asset Management, the current environment strongly favours owning gold.
Schlossberg said Monday, “The single biggest knock on gold is the fact that gold doesn’t yield anything. But in a day and age where cash doesn’t yield anything, gold looks very, very attractive, and I think that’s why you’re seeing this very strong bid underneath gold”.
The currency strategist would specifically recommend buying the popular SDPR gold ETF (GLD), which has seen massive inflows this year.
Of course, some suggest buying the physical metal rather than the ETF — reasoning that this better protects an investor from a major financial meltdown or zombie attack, either of which could negatively impact market liquidity. But Schlossberg terms the reasoning flawed.
He predicted, “If you have a zombie attack, at that point, your investment in gold is the least problem you have in the basket”.
