A year ago gold seemed to be the answer to almost every financial riddle. It was the world's favorite safe haven and was touching new heights on the back of inflation worries and a weak dollar. Today gold is down nearly 20% from its recent peak last fall, and according to Richard Suttmeier, chief market strategist at ValuEngine.com, has entered a new 5% trading range since experiencing a ''death cross'' in April.
''For a commodity such as gold, I think it could be years before gold breaks out of its new bearish bias," he says. "I think it's a significant high; the bubble has popped."
Officially, Suttmeier is targeting a trading range from $1525 to about $1600, pointing out that "there's an 85% chance" that gold will go back up and test the upper end. Perhaps more important is the fact that Suttmeier thinks "the upside is limited to where the death cross is ($1693)," which is why he's closer to closing out the gold trade rather than initiating or adding to a position in it.
For the record, it has been nearly five years since gold last posted a death cross in October 2008, roughly six months into a 10-month slump.
But even though fears about Greece and a possible break-up of the euro zone are still very much alive, the U.S. Dollar is the current hot parking place. While conditions would seem favorable to own gold at these levels, especially amidst so much economic uncertainty, Suttmeier says there's simply just ''less speculative interest" in gold right now.
As he describes gold trading right now, "it seems to be get me out on strength," until gold gets down to around $1525, and then traders should take a look a again.