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"Just like you see oil falling from US$115 to US$80 – we will see the same thing with gold and it’s already underway": analyst

"Just like you see oil falling from US$115 to US$80 – we will see the same thing with gold and it’s already underway": analyst

Gold is on the brink of a "violent downturn" and could even fall as low as US$700 an ounce as the risk of deflation in developed economies grows and technical pointers turn bearish, one expert tells CNBC.

"Technical levels show us when the trouble is coming. Gold struggled at US$1,700 and then at US$1,600. If it breaks through the next key level of US$1,500, which could be approaching soon, investors would start panicking and selling hard," Yoni Jacobs, Chief Investment Strategist at Chart Prophet Capital said on the program.

Gold, which has fallen below US$1,600 eight times in the past 10 months, is currently trading below the key 200-day and 300-day moving average of US$1,650 and US$1,670, respectively. The 300-day moving average has supported the bull market in gold since 2001, however this is no longer the case, he said.

Earlier today, gold was trading at US$1,550, at about its lowest level in a year.

"It appears that the market has decided on gold's fate. And it's not looking pretty.  It looks like gold is about to see prices collapse and is on its way to US$700," Jacobs added.

"Gold is a commodity, just like everything else, and if the world economy goes into a recession or if we see slowdown, gold is not safe from a commodities slowdown," Jacobs said.

"Just like you see oil falling from US$115 to US$80 – we will see the same thing with gold and it’s already underway."

He added that the absence of further 'money printing' by the Fed, which has supported gold prices in recent years, could spark selling in gold.

He thinks the Fed - which has extended 'Operation Twist' that involves selling medium-term bonds and using the proceeds to buy longer-term ones - may hold off a third round of quantitative easing due to mounting political opposition from Republican lawmakers.

"Most investors and financial institutions are heavily relying on governments and central banks to support asset prices by money-printing, but the reality is finally sinking in that there is not much to be done - it might be too risky, too inefficient, and too late," Jacobs said.

Downside pressure just short-term?

Warren Gilman, Chairman and CEO of CEF Holdings in Hong Kong, agrees that gold will come under pressure in the short-term, driven by profit-taking.

"If one can take a profit in these uncertain times lock in some cash, then one is going to do that. It’s also a source of some liquidity, so I do believe that the bias on the (gold) price is on the downside in the near-term," he said.

However, he maintains a positive outlook for the precious metal in the long-run. "In this environment where you have negative real interest rates, and you have central banks acquiring gold at historic levels over the last few years, the gold price will definitely rise. I’m a long term believer in gold; I’m not taking a short position."

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Source: Kitco
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Source: Kitco
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Source: Kitco
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Source: Kitco

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10 Comments

nup

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"Most investors and financial institutions are heavily relying on governments and central banks to support asset prices by money-printing

Does this statement not highlight one of the main causes of the financial wealth illusion that exists? 

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Gold is always worth more then other money (currency). Under the current worldwide circumstances, It is just a matter of time until gold reaches US$ 2’000.- p/oz.

http://www.youtube.com/watch?v=qeQtpRGSI_8

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End of July 2012 ?

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That's about right Walter - the latest end of September 2012.

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Are you OK , Walter   ?...... the rest of the gang is on another link , and you're over here alone ,  muttering to yourself ...

 

......Uncle Bernie's got the Top 10 list out ! ..... c'mon Waltie , come & play with the other kiddies .....

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Gummy – GOLD will be a talking point in the coming months. I’m still a strong believer in :

http://www.youtube.com/watch?v=GXC44l942bE

 

Considering: http://www.youtube.com/watch?v=DxMdZ0d0qew

 

It would be a great idea for New Zealand to protect our population from losing money – what do you think ?

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...... the team over at the Daily Reckoning do produce a cogent article for a gold & silver " mania " in the months ahead ...... and do they have an excellent track record at calling any market they're studying ....

 

Sadly for the Gummster , I've an appalling investment history , and still believe in capitalism ( i.e. that returns to actual business activity will exceed those of other asset classes , such as shiny bars of metal which sit in a vault and do absolutely nothing )....

 

..... one day I'll be right , sure of it ..... but for now , the " fear factor " investments of bonds & gold do seem to rule .....

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Roger – your response has not much to do with my article/ links. Are you still unable to listen to you tube ?

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Sorry Walter : Still cannot You-Tube . ...... Telstra has alot to answer for , they make your Telecom look competent , caring , and affordable .....

 

.... I shall sit in  a corner , and sob quietly to me Gummy self ........ oooooooooooh .....

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