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Spot Gold Prices Point To A Jump

ByCommodityOnline
Published 04/05/2013, 07:01 AM
Updated 05/14/2017, 06:45 AM
GC
-0.40%

The yellow metal slumped 1.4% to $1,552.80 Wednesday marking a nine-month low. That's after gold prices slid below $1,600 an ounce in Q1 on hints of a global economic rebound. The slide prompted market participants to shed gold holdings.

It's "certainly understandable" for investors to have sold gold following a 400% appreciation over the last decade and move into stocks, said Malcolm Burne, chairman of the Golden Prospect Precious Metals investment trust.

But, here's why the tide may be about to turn.

Breakout Ahead
Gold Price 2001-2013
If you look at a chart of gold prices over the past 12 years, you'll see we're due for a new breakout.

Gold has been going through consolidation pattern since October of last year when it traded around $1,800 an ounce. The phase is similar to the kind of move the metal made in 2006-2007.

Gold prices hit $725 an ounce in May 2006, and then fell back to around $600 an ounce by September. After trading between $600 and $675 an ounce through September 2007, gold prices jumped to $833.75 by the end of the year - a 24% jump in three months.

The same scenario is emerging.

After hitting $1,900 an ounce in September 2011, gold prices slipped back to around $1,600 by the end of the year. Gold's been trading between $1,550 an ounce and $1,800 an ounce for about a year.

Another jump like in 2007 would take prices to about $1,970 an ounce in the coming months and when the latest round of selling is done, this price climb could start.

"[O]nce the sellers and profit takers have been shaken out fully, the arguments for a new revival upwards are more solidly in place than ever," Golden Prospect's Burne maintained.

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