(Kitco News) – Gold has established a price bottom over the last few years and is now ready for a rally, according to one expert, who is bullish on the metal.
“I don’t think a bull market has really begun. Once we start getting above $1,300- $1,400 on the upside, that’s really where the price trend will really start to establish itself,” BigPicture Trading chief derivative market strategist Patrick Ceresna told Kitco News on the sidelines of the Vancouver Resource Investment Conference.
But, before a rally is triggered, there will likely be a minor pullback in gold prices, Ceresna pointed out.
“For the first quarter of the year, the gold highs are in. So I’m looking for a pullback to around $1,250-40. But, going into the second and third quarters, we would be buyers on dips,” he said. “Gold would have already gone to $1,000 if it was destined to go there. The entire last few years have been one bigger bottoming formation where gold was establishing its lows.”
Once it is clear that the Federal Reserve is pausing its rate hikes this year, the U.S. dollar will weaken, which will be a trigger for gold prices, Ceresna noted.
“The U.S. dollar bull market still has more to go. But, when the Fed and the central banks stop their rate hike cycle and begin to ease, the trend in the dollar could actually start to reverse and we’d see the dollar start to correct. If that scenario was to emerge, then that could be the real line in the sand where gold can actually start getting bullish,” he explained.
Ceresna sees the Fed pausing this year, adding that he does not expect any more rate hikes.
“The markets are calling the Fed’s bluff and I believe the markets over the Fed. And in my mind, we’ve already entered some form of a bear market and we’re going to most likely see the Fed start[ing] to back away from its tightening policy,” he said.
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