Gold to test the summits of 2016 then – Analyst

(Kitco News) – After peaking at 10 months on Tuesday, gold is expected to test the 2016 highs, reaching the levels of $ 1,360 and $ 1,370, an badyst said.

According to his forecasts, after reaching the peaks of 2016, gold will probably suffer a significant but temporary decline, said Global Pro Traders CEO David Brady in a Sprott Money article published last week.

"The preponderance of probabilities indicates a strong return of gold to $ 1360 and $ 70, once we reach the floor shortly thereafter, with the risk of a significant downturn to to follow. Following the decline, gold is expected to reach new highs later this year, as the prospect of further stimulus by the Fed, global central banks and governments around the world becomes more and more likely. and that the fiduciary currencies continue to be devalued mbadively, especially the currencies. dollar, "wrote Brady.

According to Brady, gold can reach the level of $ 1,370 in several ways, adding that one way or another is increasing.

"Gold has grown parabolically since its low of $ 1,167 in August. It peaked at $ 1,331 on January 31st, when the overbought was extreme and after a clearly negative divergence on both MACDs … If this parable holds, you can see where it is heading, climb back to the top of 1,377 dollars reached in 2016, "he said.

If the gold was $ 1,377, the withdrawal could bring the gold to $ 1,297, $ 1,240 and $ 1,220, which will be a level of support, Brady said.

The positioning of fund managers in gold reveals a change in perception, favorable to the rise in gold prices, stressed Brady.

"They went from a record short net position of 109,000 contracts on October 9 to 50,000 on December 31 (25,000 on January 25), a change of 160,000 contracts – more than 30% of outstanding interests – in just 14 weeks, "he said. "The relatively weak net position held by the Funds, even with increases reaching the January 31 peak, warrants a further rise to 1360 and 70 years and, after a retreat thereafter, a move towards new summits later this year. "

The US dollar should also play in favor of gold, Brady added, adding that the US dollar index is expected to peak at 99 or 101.60, then fall back to 80.

The conversation around the Fed's dovish round will take center stage in the near term, especially with the publication of the FOMC meeting minutes on Wednesday as traders dissect the statement for clues.

"The Fed is preparing us for a return to QE in the near future. Many badysts I respect on this subject agree that this will create widespread inflation for a country that can not experience a dramatic rise in interest rates or yields to drive down prices without risk collapsing. This is the ideal environment for Gold, and sooner or later these policies are in place, the more people think they will be inevitable over the next two years, the more Gold will grow, "said Brady.

At the time of writing, April Comex's gold futures were trading at $ 1,340.00, up 1.66% over the day.