gold prices
Gold price (XAUUSD) cruised past the important milestone of $2,000 this week as investors remained worried about the weaker dollar and lower yields. And now, analysts believe that the rally is just getting started. In a report yesterday, I wrote that analysts at Deutsche Bank had boosted their outlook for gold price to $2,100.
Deutsche analysts are not the only ones bullish about the metal. For example, a few months ago, analysts at Bank of America made an audacious call that the price would climb to $3,000. And, another analyst recently predicted that the metal would climb to $5,000.
In a report yesterday, analysts at JP Morgan raised their outlook for gold price from $1,850 to $2,000. They still remain a bit cautious about the price, with their mid tern target being at $1,600.
In an interview with Barrons delivered yesterday, an analyst at Barrons explained why he believes that gold price would hit $2,500. He explained that gold tended to have an inverse relationship with the US dollar index. Indeed, in the past few months, the dollar has slipped by more than 10% in the past three months while the gold price has jumped by 20% in the past three months as shown below.
In the calculation, he explained that with the US dollar index trading at $90, and with the real interest rates being at -2%, gold would be worth about $2,500.
A long-term chart shows that gold price has been in a strong upward trend in recent months. Really, the price started ascending on 1st January 2015, when it was trading at $1062. Since then, the price has formed a cup pattern.
The price is also above the 50-day and 100-day exponential moving averages while the RSI has climbed to the highest level since 2008. Therefore, the trend is likely to continue rising as bulls target the next resistance at $2,100.
However, on the flip side, a move below $1600 will invalidate this thesis. This price is slightly above the 78.6% Fibonacci retracement level.