In my last World Reports I suggested that gold could rise soon. Recently a reader asked what I thought the price should be and what technical factors to watch.
Here is his question and my reply.
Dear Gary, Not long ago you wrote advising us that essentially all major currencies were in trouble and that gold could be a good place to invest. I am very interested in this advice because I’ve also noticed bullish signals in the gold market.
I like to take a perspective from all angles. According to a technical analysis of cash prices for gold we should see gold take a sharp bullish move by May 2001. It will probably hit a bottom of $257 and should reach $305 in this move. Sometimes the market makes a false bearish breakout before this action. in such a case it may reach 252 on the downside before this more expected move.
And here are my questions: 1. What are the fundamental criteria you are looking at which make you feel that gold is possibly a good investment? 2. What are your opinions on timing? 3. What do you feel is the right value for gold to reach (vs. USD)?
Another interesting chart is in the US Dollar index. The head and shoulders is indicative of a market change (you predicted it) but there is a retracement which has broken the resistance line and will be supported by it now. This could be a second, larger head and shoulders reversal indicating a major bearish shift in the USD. But how far can it drop?
I would love feedback on are the direction of the Icelandic currency (my bank has advised I buy it) I have no data for it.
Here is my reply
I quit trying to time or price the metals market for speculative purposes long, long ago. Instead I have a deep belief in holding some of these assets as insurance based on a study of Gold Prices since the 1600s. You can see this study by downloading the free course International Currencies Made EZ at our site https://www.garyascott.com/currez/
This study shows that gold’s price moves well behind most commodities and rises in sudden spurts at unexpected times. Other commodities prices risen enormously since Gold’s last rise and the lack of any stability in the fundamentals of any currency leads me to feel that gold could rise. When and to what level, I have no clue. If I bought it would be systematically for awhile with the view of a long term holding pattern.
Until next message, good global investing!