Prices due for a correction before next leg up, analyst says
By Myra P. Saefong, MarketWatch
NEW YORK (MarketWatch) -- Gold futures extended their strong recent gains on Monday, climbing above $1,280 an ounce, as investment demand for the precious metal continued to strengthen.
In recent dealings, gold for December delivery (GCZ10 1,283, +5.50, +0.43%) rose $5.50 to $1,283.00 an ounce in electronic trading on Globex. It earlier hit an intraday high of $1,284.90.
The contract reached a fresh settlement high of $1,277.50 an ounce in New York Friday, after touching an intraday high of $1,284.40 in electronic trading. Read Friday’s Metals Stocks column.
At the moment, there is a “lack of major news to prevent a sell-off in gold,” said Chintan Karnani, chief analyst at Insignia Consultants in New Delhi. He referred to gold’s current rise as “too much money chasing too few goods.”
“Investors are invested in gold ... and they are not exiting their gold investments,” he said, pointing out that “fundamental gold is bearish as there is no demand, but gold has now become a paper asset.”
But “technically overbought conditions exist” in the gold market and “a correction of $50-$60 should happen anytime before the next leg higher to $1,376,” Karnani said.
He expects gold to fall in the first two weeks of October, then rise.
He warned, however, that “if gold continues to rise in October or nears $1,500, then it will be in a bubble zone. Unless gold has a small correction to $1,220 by mid-October, gains will be unsustainable in the medium term to long term.”
