Gold Is Going to $1,700 and Beyond Says Trader
By Jeff Macke | Breakout 2012/8/27After dominating the headlines for years it's been a tough slog for gold of late. The barbaric metal is getting outpaced by the broader equity markets so far in 2012 and has lost more than 5% over the last twelve months. According to Eric Wilkinson of Blue Group Trading, all of that is about to change.
Wilkinson's bullishness has both fundamental and technical reasoning. Technically last week saw big volumes in gold at $1,640 an ounce, followed by a $20 rip in almost a straight line. That makes $1,640 good support on a technical basis. It's where other traders will be putting money to work which creates natural price support.
The quick rise also forms the trader's fundamental view. Wilkinson and others think European countries have been huge sellers of gold to pay down their debts.
"When you have countries like Portugal selling $500 million of their assets of gold in a given year, that puts a tremendous amount of pressure on the downside," he explains.
When big sellers step away sharp gains follow. If Europe is getting close to ending its almost forced selling, as Wilkinson suspects, it's going to make life much easier for gold bulls.
A real victory for gold bugs would come from a breakdown in the dollar. While fervently hoping for no QE3, Wilkinson still thinks the U.S. is going to continue to weaken the greenback. Less valuable dollars means more expensive gold for those buying with bucks.
The Wolfman's immediate price target is $1,700 with support at $1,640. Though he'd trim gains on a move into the $1,700s Wilkinson thinks things are finally looking up again for investors in the most precious of metals.
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