When was the last time we saw spot gold prices reachingf the current top at US$1,789 per pound last Wednesday?
That was in October 2012, and the yellow metal began to slide after that. In commodity markets, we believe in cyclical trends. In other words, basic commodities like precious metals balanced by dollar reserves and staple grain food will oscillate to the parabola patterns of top and bottom formations over the years.
In simpler terms, it is just a matter of time when these prices will visit the previous high.
As the world economy grows and population increases over the years, basic commodities are always on cycles on creating higher highs over years. This could be imagined in a gradual slant-upward channel pattern on a long-term chart.
However, we reckon crude oil may become an exception to this theory since the future world will proceed to a global base of majority forces to be driven by renewable energy.
Since April, gold prices have been firm and well contained in the ranges of US$1,675 to US$1,750 per pound. During this period, market strength has shown good support enough to make another new rise soon. In late June, the yellow metal finally broke the resistance and started to move higher.
The US has clocked 2.7 million or higher covid-9 cases this week with average 25,000 new counts on daily basis. Economist are worried of a second wave, while most Americans still do not believe in wearing masks and moving randomly to contest against lock down in cities.
The recent street protests throughout the country against racism has spread over more than 50 cities and could worsen the situation by triggering another pandemic crisis soon!
Since the recovery in major indexes after March, Nasdaq has ridiculously created a new historical high above 10,000 benchmark before sliding. Moving forward, with the fear of a second outbreak of covid-19 in US together with overvaluation of the stock markets, we foresee a potential correction to start this week among Dow Jones, S&P and Nasdaq indexes.
In simple logic, the pump-and-dump activity in the triple stock markets will see a flight out of funds for taking profits among the traders. Money will then flow into precious metals as the next target.
In fact, gold prices have been waiting patiently for months to make another surge. The yellow metal has to wait for the digestion of stock markets to start before it begins to soar again.
With the recent breakout above US$1,750 per pound in gold prices and now approaching US$1,800, we forecast that it won’t take too long before the end of 3Q season to see a surge at US$1,900 and challenge the all-time high record made on September 2011.
Silver will take a back seat now. Thus, focus more on yellow metal. Have a great trading profits soon coming your way.
Dar Wong is an investment professional based in Singapore. The opinions are solely at his own. He can be reached at [email protected].