The current global environment will disrupt the usual inverse relationship between the U.S. dollar and the precious metal – gold, as the metal continues to be on course to head as high as $1,500 per ounce, according to a technical analyst.
An anomaly to normal market moves as investors pull back from risk exposure around the November 8 vote would be potentially created by the impending presidential election in the U.S. says Ron William, Founder & Principal Market Strategist at RW Market Advisory.
"Traditionally yes, the inverse correlation has always been there. But there are exceptions and I think this is when it depends on the timing of the move, but also the cause. In this case it will be more of a safe haven flow argument, the U.S. dollar in particular, given what might happen around the election cycle," he told CNBC's Squawk Box Europe.
Peaking in its prices in mid-July and slipping notably around the start of October, the price of gold has jumped around 20 percent so far in 2016. There were many factors that led to this as the precious metal was hit by a raft of factors. These factors include disappointment regarding action from the Bank of Japan, some better-than expected US economic data releases and a slew of hawkish Fed comments, which led to increased expectations of a rate rise and therefore dollar strength.
In William's view, the current price point now leaves room for upside.
"Gold has already unwound from its overbought conditions. We had very crowded positions at the recent high - it's looking like it's ticking up again on the back of Friday's uncertainty and now gold is pushing up, I suspect that will continue technically until the 1,500 mark," he forecast.
Many of the large banks, including Wells Fargo says the recent sell-off is just the beginning and adds that the this bullish view is to be contrasted with the outlook proffered by other banks.
The Wells Fargo noted: "Is the $60 drop in gold prices the beginning of a deeper dive? Our answer is yes, it may very well be," in a report penned in early October by John LaForge, its head of real asset strategy.
"The history of gold, and commodity super-cycles, says that gold may very well lose another $200/oz., testing the $1,050 level, before it is time to buy again," he opined.
The trend of bearishness of the precious was professed by meanwhile by another bank - ABN Amro. Down to$1,200 for 2016 and $1,150 in 2017 was the price range that the bank revised its gold forecasts to as of mid-October.
"Gold prices have fallen and broken below the 200-day moving average. This means that this year's uptrend is over. We have revised downwards our gold price forecasts because we think that investors will continue to liquidate," says the report authored by Georgette Boele, co-ordinator FX and precious metals strategy,
(Source:www.cnbc.com)
An anomaly to normal market moves as investors pull back from risk exposure around the November 8 vote would be potentially created by the impending presidential election in the U.S. says Ron William, Founder & Principal Market Strategist at RW Market Advisory.
"Traditionally yes, the inverse correlation has always been there. But there are exceptions and I think this is when it depends on the timing of the move, but also the cause. In this case it will be more of a safe haven flow argument, the U.S. dollar in particular, given what might happen around the election cycle," he told CNBC's Squawk Box Europe.
Peaking in its prices in mid-July and slipping notably around the start of October, the price of gold has jumped around 20 percent so far in 2016. There were many factors that led to this as the precious metal was hit by a raft of factors. These factors include disappointment regarding action from the Bank of Japan, some better-than expected US economic data releases and a slew of hawkish Fed comments, which led to increased expectations of a rate rise and therefore dollar strength.
In William's view, the current price point now leaves room for upside.
"Gold has already unwound from its overbought conditions. We had very crowded positions at the recent high - it's looking like it's ticking up again on the back of Friday's uncertainty and now gold is pushing up, I suspect that will continue technically until the 1,500 mark," he forecast.
Many of the large banks, including Wells Fargo says the recent sell-off is just the beginning and adds that the this bullish view is to be contrasted with the outlook proffered by other banks.
The Wells Fargo noted: "Is the $60 drop in gold prices the beginning of a deeper dive? Our answer is yes, it may very well be," in a report penned in early October by John LaForge, its head of real asset strategy.
"The history of gold, and commodity super-cycles, says that gold may very well lose another $200/oz., testing the $1,050 level, before it is time to buy again," he opined.
The trend of bearishness of the precious was professed by meanwhile by another bank - ABN Amro. Down to$1,200 for 2016 and $1,150 in 2017 was the price range that the bank revised its gold forecasts to as of mid-October.
"Gold prices have fallen and broken below the 200-day moving average. This means that this year's uptrend is over. We have revised downwards our gold price forecasts because we think that investors will continue to liquidate," says the report authored by Georgette Boele, co-ordinator FX and precious metals strategy,
(Source:www.cnbc.com)
