- Gold closed at $1,270.90 per troy ounce on Thursday
- Advisors and technical analysts are forecasting a move to the $1,400 to $1,450 per troy ounce area for gold this year
- Gold’s bounce has not convinced all market observers that a sustained rally is in store
Gold is an asset that, over the course of history, has not longed for critics. However, the SPDR Gold Shares (NYSEArca: GLD), the world’s largest physically-backed gold ETF, is flirting with a year-to-date gain of 20%, enough to keep some of the critics quiet for now.
Still, a case can be made that bullion and exchange traded funds like GLD have rallied too far too fast, meaning that if certain price points are taken out, the yellow metal could be vulnerable to technical selling.
Gold prices strengthened this year as market volatility triggered safe-haven demand. Nevertheless, more long-term investors who are seeking insurance through a gold play should not throw everything into the precious metal. A portfolio allocation of about 5% is adequate for a partial hedge against any more trouble ahead.
Advisors and technical analysts are forecasting a move to the $1,400 to $1,450 per troy ounce area for gold this year, which implies significant upside from current levels. Gold closed at $1,270.90 per troy ounce on Thursday.
“Investors should consider reducing their gold holdings if the price approaches $1,310 an ounce over the coming weeks and increasing them if prices fall back to $ 1,100 an ounce,” according to a note from UBS Wealth Management posted by CNBC.
Gold’s bounce has not convinced all market observers that a sustained rally is in store. Although precious metals ETFs have recently displayed some strength, gold is still in a lengthy bear market, giving some traders pause about how much more near-term upside the yellow metal has in store.
Gold has been in a 3-year bear market, which has seen failed rallies on the back of various news events. Continued strength in the US economy and labor market has offset political and economic events since the Gold market turned bearish in 2013.
The good news is that UBS sees the worst of gold’s woes as having passed.
“While gold price should come under pressure again, we reiterate our view that the structural decline in gold prices is over. Negative real U.S. rates, newfound investment demand, and central bank purchases are supportive of gold at around $ 1,200 an ounce over six to 12 months, in our view. Falling mine supply is another supportive element, although higher gold prices should increase scrap supplies and might raise the prospect of availability over and above our expectations,” according to the note posted on CNBC.com.
SPDR Gold Shares
Tom Lydon’s clients own shares of GLD.