Compelling Signs the Gold Price Is Bottoming
You'll sometimes hear traders and other market participants recite the axiom that "price is everything." At the end of the day, the thinking goes, everything an investor needs to know boils down to price.
Underlying this adage is certainly a kernel of truth: No matter what one thinks of a particular asset class or sector, price is an indispensable consideration. At the right price, any security or other asset could be overvalued or a bargain.
Stock Price Charts
Currently, a number of signs are flashing that suggest gold is indeed a bargain right now.
The Limits of Price Forecasting
Like many markets, the precious metals tend to be subject to seasonal as well as cyclical forces. Despite gold's tendency to preserve its purchasing power over time, it has undeniably experienced ups and downs when measured in any particular currency.
One of the best signs for value investors is when an asset's price falls to an apparent "bottom."
Of course, there's no definitive way to know if prices (for anything) have truly reached their trough. Markets can remain irrational longer than most of us can remain solvent.
It was nonetheless telling on Thursday when spot gold sank below a key technical support level at $1,270/oz. A look at the intraday price movements suggests the gold market has established a new support level at $1,266/oz, matching its low from about a week earlier.
Gold Hits Fresh 2019 Lows
This recent dip for gold prices brought the metal to its year-to-date low for 2019. Some analysts also believe gold will test support at $1,250/oz this summer, however.
Gold futures for June delivery still managed to climb back to $1,280/oz by the following trading day, staging a modest recovery. Still, open interest in the futures trade sank to its lowest of the year, as well.
Financial institutions around the world seem to be stocking up on the precious metal while prices remain well below their rolling 52-week high around $1,360/oz. Central banks in particular have purchased an additional 145 metric tons of gold so far this year.
Interestingly, the U.S. stock market is at all-time highs at the moment. The standard contrarian or value-investor playbook dictates that better value can surely be found elsewhere in such a scenario.
If gold really has found its bottom, this would set up a very bullish case for the next 18 months or so.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.
Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.