Gold prices are showing signs of investor support that may lead to a stronger rally, writes Michael Kahn, a technical analyst and columnist for Barron’s.
“The technicals have made some quiet improvements, suggesting that now might be a good time to take that first nibble on the long side,”
he says in an Oct. 13 article. “To be sure, the major trend is still down. Every bull market, however, starts somewhere, and that somewhere is usually a multi-year low.”
Gold lost nearly half its value since peaking at $1,920 an ounce four years ago as the dollar and U.S. economy strengthened while inflation remained tame. The growth of the global economy has slowed this year, raising expectations that central banks including the Federal Reserve will provide monetary stimulus to avoid a recession.
Gold on Oct. 14 pushed above its 200-day moving average price, a key indicator of long-term trends, of $1,174 an ounce. Getting above a resistance area of $1,148 was significant, Kahn says.
“There are many bullish signs popping up in gold, silver and mining stocks,” Kahn says. “None will convince the trend-following crowd to change camps from bear to bull, but somebody is already stepping up to buy.”
Billionaire hedge-fund manager Paul Singer recommended that investors buy bold as central bankers prop up bond and stock markets with near-zero interest rates and bond purchases,
according to Bloomberg News.
“In a world where the value of paper money is affirmatively aimed at being degraded by central bank policy, it’s kind of surprising to me that gold can’t catch a bid,” he said at a conference in Tel Aviv on Wednesday. “I like gold. I believe its under-owned. It should be a part of every investment portfolio, maybe 5 to 10 percent.”
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