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LAWRIE WILLIAMS – Gold signalling a $1,000 price rise – Gundlach

Speaking on Tuesday this week, Jeffrey Gundlach, founder of the big DoubleLine Fund in the U.S. and with control of assets under management estimated at nearly $120 billion, commented that the gold price had broken its downtrend line and was on the verge of breaking out to the upside.  “Something big is happening” Reuters quotes him as saying.  Reuters goes on to report that  Guindlach said further that based on classic chart reading an “explosive, potential energy” of a huge “head-and-shoulders bottom” base was signalling a move of $1,000 in gold prices.  The gold price had breached the $1,350 level on the upside a few times recently which will have prompted his forecast.

But, perhaps Gundlach spoke too soon as since the last time gold soared through $1,350.  Only a week ago, the gold price has been pulled back to the low $1,320s, stymied by a sharp rise in the dollar index to over 91 – its highest level since January.  It had fallen as low as 89.4, also only around a week ago, before recovering strongly.  The dollar recovery has probably been due to the apparent easing of trade war tensions, particularly with respect to China, and the Syrian missile adventure does not appear to have excited a seriously hostile response from Russia.  Indeed it looks like the U.S. may even be easing its Russian sanctions position a little, but any of these could flare up at any time – particularly given President Trump’s unpredictable propensity to tweet off the cuff before checking with his advisers.

But even so, the dollar rally, which many have put down to short covering, may not have much further to run and may well turn downwards again.  How much and how far will likely set the pattern for the gold price as the two tend to be inversely related.

Gundlach, in his Tuesday presentation, seized on the likely path in the near future for inflation to move upwards which can affect the price of government bonds and thereby reduce foreign interest in them due to hedging costs.  Major purchasers of U.S. Treasuries like Russia and China, and some other countries too, are also seen to be reducing their buying for both political and economic reasons which will affect medium to long term dollar strength.

Weaker bond purchases and a Jerome Powell-led Fed which may be less keen to intervene to support equities, could see equity markets drop and safe haven investment move into precious metals. Even at current levels gold has outperformed equities so far this year which is certainly not the impression given by mainstream media.

25 Apr 2018 | Categories: Gold

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