Can The Gold Price Exceed $1,400 Sooner Rather Than Later?

Gold started up around $10-15 per ounce this morning in its flirtation with $1,300 an ounce. Although gold is still short of that goal, today we’re going to look ahead. In my opinion, it is a foregone conclusion that gold will hit $1,300 within the next quarter or so. The real question I’m asking today is simple: Can the price of gold go up to $1,400 - and beyond, before showing signs of slowing down?

In order to do that, we’re going to look at two recent news sources - one suggesting that gold is, indeed, headed for $1,300 and above, and another that suggests we may be in for a leveling off of demand that will, in turn, level off the price for the yellow metal. Let’s see which makes a more convincing argument.

The Case For Optimism: An “Upside Target for Gold” Suggests it Will Go Higher

CNBC took a look at the gold charts recently and came to the conclusion that, not only has gold far outreached the resistance point at $1,200, settling above it for the time being, but that there are some indications that gold’s current target may be as high as $1,340. Daryl Guppy writes, “Gold has a very strong resistance band between $1,150 and $1,180 but this level was decisively broken with a rally to $1,240.”

Why investors and analysts see resistance bands simply because the price of a commodity hovers at a general price - that would probably take more time than would be well-spent in this base. But Guppy’s conclusion: “Any new trend breakout requires a sustained move above $1,180 and a compression in the long-term GMMA averages to show that investors have become buyers. These conditions have been met, confirming the breakout.”

Even if you’re the type of investor to pay attention to where prices hover for a time, seeing them as resistance bands, there is cause for optimism - because the current movement of gold figures to go up as high as $1,340.

The Case For Pessimism: Is Demand Set To Fall Off Soon?

Recent readers of this blog will remember that one of the variables driving up the price of gold this year is consumer demand from countries like India and China - in other words, countries with enough consumers to drive up the price of gold. If this is, indeed, the case - that these countries have enough consumer demand to affect the price of gold - then they must also have the power to lower the price of gold if demand falls off.

That remains to be seen this year. With the gold price at a two-year high and demand in India potentially ready to decline (“Gold demand in India…will probably shrink in the second quarter”), this is an interesting time for gold investors. Do you really believe that $1,300 is a bargain price, or is the two-year high simply another blip on the radar - and a bad time to invest?

Where do I fall on gold? Consumer demand from India decreasing is not enough for me to start selling. There were 125 tonnes of gold purchased in March of 2016 - which was actually down from March of 2015. If gold prices can handle that and still ascend, it may not be done with its bull run.