Gold’s Technical Picture Remain Bearish But Low Could Be Six Months Away
New York (Jun 30) Gold’s inability to hold its mid-June gains does not paint a positive technical outlook for the metal, and one trader thinks it is only a matter of time before there is a final capitulation selloff, setting new market lows.
In an interview with Kitco News, Avi Gilburt, an independent trader and author of Elliottwavetrader.net, said that he is bearish on SPDR Gold Shares (NYSE: GLD), the world’s largest gold-backed exchange-traded fund, and is expecting prices to eventually break the four-month range to the downside.
“If June’s highs hold then I am looking for lower lows imminently, within a week or two,” he said.
However, even if GLD’s price does manage to break its recent high at $115.61 a share, Gilburt said he would still remain bearish, but it would take a little while for prices to reach his minimum target at $105 a share. Tuesday, GLD was trading around $112 a share.
According to his technical analysis, he said there is currently only a 20% chance that the market has bottomed out.
“I have no indication that a lasting market low has been struck,” he said. “A higher high will just set up for another drop in the price.”
He added that in these current market conditions, with little conviction either way in the marketplace, there is a risk that GLD and the broader gold market could continue to trade in its range for the next six months.
“What we have been doing is very slowly setting up the run to lower lows,” he said. “It has been very, very slow. And I can tell you that it has been painful.”
However, Gilburt said that it is because of the “pain” in the marketplace that he is confident the final capitulation selloff will eventually push prices down to his minimum target, and eventually to his long-term target between $98 to $98.50 a share.
“Now, all we have to do is stick a dagger in the permabulls and this market is done,” he said. “We’re getting close to the final lows and I’m encouraged by that, but ‘close’ - after four years - could mean another six months.”
Although Gilburt is bearish in the near to medium term, he said that he remains bullish in the long-term and once prices fall to his long-term target, he will be eager to jump to the long side of the gold market.
“When the market gets down to my long-term target that will be a generational buying opportunity,” he said. “Can we go lower than my target? Yes, we can go lower on an extreme selloff, but I would just buy more.”