Prices for gold have seen a major drop over the recent month, but Bill Baruch, the head of futures and commodities brokerage firm Blue Line Futures, says thats no reason to be in a bearish mood.
Gold futures for June delivery were trading at $1,287 per ounce at 12:04 GMT, having dropped five percent from its peak one month ago. Gold has lost much of its vigor since a major rally from the lows in mid-December to a peak of $1,358 per ounce at the end of January.
“Instead of a bearish trend, gold has built a constructive chart pattern above the psychological $1,300 mark,” Baruch said in a post for CNBC. “The 10 percent spike through December and January has allowed the consolidation over the last 90 days to build a longer-term bull-flag.”
The expert added that the latest highs triggered overbuying in the gold market while the long trade was overcrowded. “This minor correction has relieved both of these technical indicators,” Baruch said.
According to the analyst, the gold market will see buyers interest return once the precious metal recovers and breaks the resistance of $1,327 an ounce.
“Last Thursday, gold convincingly closed back above its 200-day moving average for the first time in two weeks, a level that provides tremendous long-term value,” Baruch said. “I like being long gold until a close below the psychological $1,300 mark.”
“If it can get out above resistance at $1,327, I imagine those buyers will quickly come back to the table,” he added.
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