After the strongest month of decline since the early 1980s, gold prices started the new month and Q2 with positive developments, returning above the 4,700 USD/ounce mark. However, a market analyst said that this unprecedented correction has not ended.
In an interview with Kitco News, Mr. Avi Gilburt - a veteran technical analyst and founder of ElliottWaveTrader - said he saw two distinct technical scenarios that could cause this precious metal to fall below $4,000, moving towards the $3,800/ounce zone.
The target level set by Mr. Gilburt means that gold prices may fall by about 20% compared to the present. Spot gold prices are currently at 4,775.10 USD/ounce, up more than 2% on the day.
Mr. Gilburt said he is closely monitoring the current price movements. According to him, the first scenario is that the price hits the resistance zone around the current level and then turns down. However, he emphasized that the second scenario is even more worrying.
He said he would monitor whether gold prices would surpass the resistance level of 4,800 USD/ounce. If this level is broken, the price could rise to 5,200 USD before entering a downward trend as he predicted.
This is a more deceptive scenario, because a high price increase would make people believe that the adjustment has ended, but in reality it has only just begun," he said.
For silver, the outlook he gave is similar to gold. As long as the price remains below the peak set in March, he believes silver is facing the risk of falling to the 53.50 USD zone.
However, Mr. Gilburt also emphasized the difference between short-term traders and long-term investors. According to him, if this target price range maintains its supporting role, this could be an opportunity to buy in. However, the subsequent upward trend will be a key factor in determining whether the major trend still maintains an upward price or shifts to a downward price market in the long term.
Mr. Gilburt also pointed out the similarities between the current market structure and the peak period of precious metals in 2011. According to him, the way prices move after the current adjustment may determine whether history will repeat itself or not.
For long-term investors, he believes that silver is worthwhile if it is below 60 USD, although he does not rule out the possibility that the price will adjust further to 40 USD.
For silver, in the long term - in the next 10 years - any price below 60 USD is a very good buying opportunity," he said.
In addition to gold and silver, Mr. Gilburt believes that there are still opportunities in the mining stock group, which may increase more strongly than the base metals themselves in the next uptrend. He said that some mining stocks have bottomed out, while others are still in a correction phase, thereby opening up selective opportunities in the market.
There are quite a few mining stocks that are more likely to outperform both silver and gold," he said, adding that opportunities appear in both mining businesses and project development companies, depending on the separate chart structure of each code.
In the commodity group in general, Mr. Gilburt believes that oil prices may still increase further in the short term, but will then fall sharply by the end of this year, even possibly below 50 USD/barrel.
In general, he said his views are still based on technical structure rather than macroeconomic stories. Accordingly, important turning points of gold, silver, stocks and commodities may appear in the next few months.
