Author: Paul Ploumis07 May 2015 Last updated at 03:54:27 GMT
(Kitco News) - Analysts have noted that the gold market has suffered because of lackluster investment demand, as investors shift away from precious metals and into higher yielding assets like equities.
However, one analyst at RBC Wealth Management sees some higher short-term risk to equity markets, which could be bullish for gold and silver.
Bob Dickey, technical analyst at RBC, said in his Market Maps report, published Tuesday that the S&P 500 is six years into what could be a 27-year secular bull market, if historical patterns prove correct.
“The years ahead could represent a good time to own stocks, in general, much like it was in the 1975–2000 period,” he said in the report.
However, he also warned that this long-term bull market could still be vulnerable to “sizable” correction and “less-severe” economic recessions. “But these often represent unusually attractive buy points,” he said.
In fact, looking at the short-term, Dickey’s report said that although the S&P could see higher prices this year, there is also a highly likely scenario to see a correction between 15% and 20%. His charts showed there is a risk for the index to fall back to around 1,600, to the highs established in 2000 and late 2007.
“The breakout from the 15-year trading range on the S&P carries bullish implications for the years ahead, and gives the index a technical target to at least 2400. The likelihood of reaching that target is high, but there is also the common pattern for a breakout to test the previous ceiling of resistance, which is now the support floor, before heading higher to the target,” he said.
With equities showing higher risk of a correction, Dickey appeared to be slightly more bullish on gold and silver bullion, saying that these markets are emerging from their bear cycle and “judge to be at timely long-term entry points.”
But he also warns not to expect a rally right away. Looking at gold prices, Dickey said that the gold market could be stuck in its broader range between $1,130 an ounce and $1,300 an ounce for several more months and must hold the recent lows to remain potentially bullish.
“For gold, a breakout through the 1300 level is needed for a true bull-market signal,” he said.
Courtesy: Kitco News