Gold has been at the center of investors' attention since soaring to historical highs in the latter half of 2011. Since then, however, the metal has taken a tumble, leading many to speculate when it would hit its bottom and when it was time to buy back in. Everyone from Jim Rogers to Peter Schiff
had their predictions of where gold was headed and just how low it would go, but the fundamentals for the metal seem to be suggesting it is on the cusp of a healthy breakout.
Gold Looks to Break Resistance
Since bottoming in June, gold has been able to claw back 10% of its losses as the metal sits just below $1,350/ounce. This level is where many analysts see a key breakout for the metal. Though there is some difference of opinion as to the exact figure, a number of analysts feel that if gold is able to break the $1,350 mark (give or take a few dollars), it will be all uphill from there.
The newly bullish sentiment comes from the commodity finally breaking its downward trend and the upside that could come from breaking through its major resistance level. Analysts have pegged the metal as soaring beyond $1,450/ounce with ease assuming it is able to overcome the initial hurdle. That move would represent a 7.4% jump in the price of this precious commodity.
The Fed Taper and Gold
One of the primary reasons that analysts are pegging gold to go higher is the prospect of the Fed tapering its $85 billion monthly asset-purchasing program. Though the asset-purchasing was thought to be one of the key reasons for gold’s initial run-up, equities were able to push to new highs on the back of Bernanke
, throwing gold into the doldrums. With the Fed program set to end as early as next month, many feel that markets will take a dive, fearing that the economy will not be able to stand its ground without the Fed crutch.
That fear, many feel, will drive investors back into gold and push the price higher and through its major resistance level. From there, the price targets paint a rosy short-term outlook, but the long-term outlook is still hazy. Though there are still those who feel that the impact of the Fed’s money printing will eventually push gold to never-before-seen highs, short-term traders see the opportunity for volatility. Some have even stated that once gold breaks its resistance and crosses into the $1,400 and $1,450 range, it may be time to go short again.
The next few weeks will be especially crucial for gold and traders, as September 1 could potentially see a scale back in the current QE program. Should that happen, you can expect a bit of volatility to be injected into the markets and a prime opportunity for gold to make a move.
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Editor's note: This article by Jared Cummans was originally published on Commodity HQ.
No positions in stocks mentioned.