By Paul Ploumis 16 Jul 2015 Last updated at 03:09:23 GMT
(Kitco News) - As the biggest gold-backed exchange-traded fund hits multi-year lows on Wednesday, one analyst says investors may need to reconsider investing in gold right now.
“[It is] a very dangerous time to buy gold at the moment,” said Adam Button, currency strategist at Forexlive.com. “I don’t like the idea of buying gold unless the Fed backs down,” he added.
SPDR Gold Shares (GLD) hit a 5-year low, falling to $109.58 at 11a.m. EDT, as Federal Reserve Chair Janet Yellen gave her testimony in front of the House Committee on Financial Services.
Button said that although Yellen’s comments on interest rates did not change much from last week, the marketplace deemed her remarks as hawkish, and they remained the key driver today. He added that gold was ‘vulnerable’ ahead of her remarks.
Independent trader and publisher of elliottwavetrader.net said that although he was expecting downside for GLD, there is potential for a whipsaw upside move from this region as long as the market remains above $109.
“[B]elow 109, my target [is] 105 next. But, the correction is not done. We will be seeing lower levels, even if we get a whipsaw move up,” he said.
“As long as DXY holds 95.50, we are setting up to attack the 100-101.50 region next. Ultimately, the dollar has higher to go, I am only questioning whether more consolidation will be seen before we reach the bigger 103 region target next,” he added.
Button’s comments on the dollar mirrored Gilburt’s as he expects the greenback to move higher.
“I think the dollar is poised for an impressive run,” Button said, adding that USD hit fresh highs against Canadian, New Zealand and Australian dollar today and it is only a matter of time before the yen and euro follow.
One market veteran agreed that the dollar will continue to rise; and looking at GLD on a longer term basis, he added that gold investors are trading in a completely different market environment than they were back in 2010.
“Five years ago, cash was king in most investors’ minds,” said George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures.
“We also have totally different interest rate environment and outlook […] Today we have no inflationary signs yet, and the dollar and U.S. Stocks mostly are preferred by haven seekers,” he added.
The U.S. dollar index hit a high of $97.30 at 10:15AM EDT on Wednesday.
“Today, sectors compete for investment dollars, and dollars are needed by most eurozone investors and private banks. The dollar is now stronger and may continue the upward path for some time,” he said.
Courtesy: Kitco News