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Gold On Path To $1,450’ Despite Higher U.S. Dollar – BAML

@djmckennon

A commodity bull market is forming and gold has a big part to play, according to one Bank of America Merrill Lynch (BAML) strategist.

This year, gold prices will rise past the $1,350-$1,375 resistance level, BAML technical strategist Paul Ciana told CNBC on Saturday. And from there, Ciana added, the yellow metal could hit $1,450, where it hasn’t traded at since May 2013.

“As soon as this $1,350 to $1,375 area goes, which I do think it will later this year mostly when the dollar rally kind of tempers itself and neutralizes, that puts gold on the path to $1,450 so plenty of room there,” Ciana said.

“Gold prices have been forming a six-year long base,” Ciana said. “In the technical world we like to say, the bigger the base, the higher in space. That’s what gold is doing.”

The yellow metal’s prices have faced significant downward pressure from the firming U.S. dollar these past few weeks, even ending last week in red for the third consecutive time.

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As Asian markets opened on early Monday, spot gold on Kitco.com was trading flat, last at $1,316.30, up 0.09% on the day, while June Comex gold futures were last at $1,317.30, up 0.20% on the day.

The U.S. dollar index ended last week at 92.61 — the highest level of 2018. Early Monday, the index was last at 92.56, up 0.16% on the day.

But, Ciana is confident that the U.S. dollar will not be a hurdle for much longer, as he sees both the greenback and gold going up at the same time.

“When U.S. financial conditions are tightening, like they are today, compared to 2015, very early 2015, gold prices actually rallied about 12 percent and the dollar index had rallied about 6 percent,” explained Ciana. “There are situations where they both can move in tandem for a short period of time.”

Gold’s upward trajection alongside the U.S. dollar will however be only temporary and then the inverse relationship will once again overpower other factors, Ciana added.

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6:31 PM – May 6, 2018


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It’s not just gold that is expected to go up, the strategist pointed out, stating that the yellow metal’s rally will be part of a “bigger picture” when it comes to commodities in general.

“If we look at the CRB index, our monthly chart, which is essentially the rising tide of commodity markets, they just broke out ending April,” Ciana said. “They’ve closed just above $200, confirming an ascending triangle base.”

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