By Barani Krishnan
Investing.com - After a herculean effort, gold has managed to recapture the $1,900 fort it lost 20 weeks back. But the real story is whether it will get to the all-important $2,000 prize. So far, it doesn’t look promising.
Gold longs spent their first full day back in the $1,900 zone by barely making a ripple, matching the tame performance of key rivals such as the 10-year Treasury yield, the Dollar Index and Bitcoin.
“Gold is also underperforming against periods of high inflation, which fuels our conviction for upside risks in the yellow metal, as much as the Fed sticks to their FAIT framework,” TD Securities said, referring to the Flexible Average Inflation Targeting that moderates the traditional 2% inflation target of the U.S. central bank.
Gold for June delivery on New York’s Comex was at $1,901 by 1:33 PM ET (17:33 GMT), up just $3, or 0.2%, on the day after Tuesday’s triumphant return to $1,900. Wednesday’s session high was $1,913.25, a peak since Jan. 8.
The spot price of gold, reflective of real-time trades in bullion, was also at $1,901, after an intraday high at $1,912.79.
Traders and fund managers sometimes decide on the direction for gold by looking at the spot price — which reflects bullion for prompt delivery — instead of futures.
Conviction has become a rare commodity in gold as the average long investor tried to stay true to the yellow metal through its travails of the past six months.
Since January, gold has been on a tough ride that actually began in August last year — when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in Covid-19 vaccine efficiencies were announced. At one point, gold raked a near 11-month bottom at under $1,674.
Thus to many, gold’s return to above $1,900 is logical, overdue, and even remarkable—considering the tortuous journey it’s been on this year.
But after so many false starts during mini rallies in the $1,700 and $1,800 levels, skepticism understandably lingers for $1,900 pricing and even more, of course, for $2,000 gold.
Sunil Kumar Dixit of S.K. Dixit Charting in Kolkata, India, said he saw the spot price of gold moving to $1,922 first, then $1,958, making what would be defined as “a triple top formation,” before plunging to between $1,848 and $1,828.
“To me, the odds of a pre-$1,960 plunge are a lot greater than a promising rally beyond $2,000,” said Dixit.