Is the recent gold rally a real change in direction or a dead cat bounce?
If you’re having trouble making a phone call recently, it’s because gold bugs have been calling up everyone they know to say, “See? I told you so!”
In the past week, gold has rallied over 2% and is now trading at $1,280 per ounce. Since the end of June, gold is up nearly 9%, about $100 from its lows. Yet, the yellow metal is down 23% for the year, so those gloating phone calls were likely made collect.
Still, gold bugs have some reason to be optimistic. Federal Reserve Chairman Ben Bernanke has said this week the market shouldn’t expect a surprise early tapering of the central banks $85 billion per month bond-buying program (QE2). That means more dollars in the financial system. As gold is often seen as an inflation hedge, the theory is that gold will continue to rally as the dollar gets weaker.
But should gold owners pop open the Champaign bottles in their bunkers as if their dreams of a worldwide financial collapse have finally come true?
No, says CNBC contributor Steve Cortes, Founder of Veracruz TJM. He says there are three reasons why this gold rally will fail.
On the other side, CNBC contributor Abigail Doolittle, Technical Strategist at The Seaport Group, says the technicals are pointing to a gold rally. However, before it moves up, the yellow metal is in for a lot of volatility.
Who is right? Watch the video above to hear Cortes and Doolittle battle it out on gold.