It's one thing to say gold is going higher. But, when Jeffrey Gundlach, manager of the $49 billion DoubleLine, says he thinks gold could hit $1,500 per ounce by the end of this year, that's something people pay attention to.
In a webcasted presentation called "Penny For Your Thoughts", Gundalch noted the 96 percent reduction in the U.S. dollar's purchasing power since the Federal Reserve Bank was established a century ago, likening the end of the gold standard to the silver debasement of the Roman denarius from 64 to 270 AD. During the question and answer period, Gundlach said he thought gold could move to $1,500 this year.
The last time gold was at $1,500 was in April, 2013. Gold traded at $1,260 per ounce on Wednesday.
"Of course, there's a chance [Gundlach] could be right and gold could go higher," said Richard Ross, global technical strategist at Auerbach Grayson. "But, there's very little in the short-term technicals to suggest that move has begun in earnest."
Gold has been trading in a range between $1,180 and $1,400 for much of the past year, notes Ross. For the short-term, he is keeping an eye on the $1,270 line, which is close to the current 150-day moving average. "A break back above that level could set us up for a retest of that resistance around 1,400," said Ross.
However, that range should be seen in the context of the longer-term chart, according to Ross, a "Talking Numbers" contributor. "We're still in a downtrend from the highs that we established back around 1,900," he said.
Ross sees gold's break below its 150-week moving average as technically significant. Since the start of 2013, the 150-week moving average has been relatively flat, near the $1,525 level.
"You've got to get through 1,400 before you can trade 1,500, clearly," said Ross. "And, in the shorter term, you've got through 1,270 before you can trade 1,400. So, there's a lot of ifs and buts here in that argument. We really need to see a base breakout before we can call this a base."
Gina Sanchez, founder of Chantico Global, said that while there's a possibility that gold could go higher, she thinks the chances are low. The World Bank's reduction of global growth from 3.2 percent to 2.8 percent may cause some flight-to-safety buying of bullion. And, global interest rates are low, which traditionally augurs well for the yellow metal. But, Sanchez believes that won't last.
"Even though we're in a benign interest rate environment in the U.S. – and certainly within Europe and Japan – I do think that in the U.S., rates will likely start to trend higher by the end of the year or into 2015," said Sanchez, a CNBC contributor. "That's not great for gold. We don’t see a ton of inflation. If anything, maybe there's some deflationary pressures, particularly in Europe."
Gold needs to feed on something, said Sanchez, but she doesn't see a lot of major economic pessimism or inflation worries.
"I'm not sure that I see why gold, except for some short-term reasons, might pop a little," added Sanchez.
To see the full discussion on gold, with Ross on the technicals and Sanchez on the fundamentals, watch the above video.
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- Jeffrey Gundlach
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