Gold prices down 2% but the bull market is still alive

(Kitco News) - The gold market is starting the week under pressure down 2% as it has broken below critical support points, but according to one market analyst, the precious metal is still in a healthy long-term bull market.

In a report Friday, Florian Grummes, gold market analyst at Midas Touch Consulting, warned that in the short-term, with gold prices under critical support at $1,480, bearish traders are in control of the marketplace.

He added that investors need to keep an eye on the next support level at $1,450 and there is a chance that prices could fall as low as the summer’s initial breakout level around $1,380 an ounce.

However, he also said that investors shouldn’t give up on gold’s rally just yet.

“Although the weekly chart is without question overbought, fundamentally there are currently enough reasons for a continuation of the rally,” he said. “Indeed, in this context, even a veritable gold rush in the markets is possible in the next three to four months!”

Grummes said that he sees a strong possibility of gold trading around $1,800 an ounce by early next year.

Federal Reserve monetary policy will continue to be a major factor that will drive gold prices through the first few months of 2020, he said.

Although the Federal Reserve signaled at its last monetary policy meeting that it is not expecting to change interest rates for the rest of the year or next, Grummes said that there is more to the U.S. central bank than just interest rates.

He noted that the Federal Reserve has intervened in money markets pumping $75 billion into the system several times during the last two weeks. The central bank is expected to add even more money to the system in coming weeks.

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MARKET SUMMARY

INDICES

Name Last Change
DOW 26770.20 0.96%
S&P 500 2986.20 0.39%
NASDAQ 8089.54 0.83%
TSX 16377.12 0.30%
TSX-V 542.43 0.00%

Resource Commodities

Name Last Change
Gold 1490.25 0.18%
Silver 17.53 0.06%
Copper 2.63 2.625
Platinum 901.00 0.67%
Oil 53.78 0.28%
Natural Gas 2.32
Uranium 24.88 0.00%