(Kitco News) - Gold prices have mildly retreated after strong gains at the start of the week, but despite the slight pullback, prices remain up on the year, which has one commodities broker bullish.
However, investors may have already missed their chance to jump on the gold bandwagon.
“Eventually, prices will break out of the trading range on their way to repricing; we believe the ensuing breakout of the trading range will be upward,” noted Carley Garner, senior futures market strategist and broker for DeCarley Trading in a report on RealMoney Wednesday.
“[A]nybody interested in playing the upside should wait for a pullback, or at least utilize a strategy with mitigated exposure,” she suggested.
Although, she continued, it may be too late for investors to get in, there will be other opportunities in the gold market. “It is probably too late to get aggressively bullish gold from these prices. Wait for the next bus,” she said.
Gold prices rallied to an eight-month high, briefly pushing above $1,200 an ounce Monday as investors sought out safe-haven assets. The market has since backed down slightly with April Comex gold futures settling down $2 at $1,194.60 an ounce.
Garner noted, however, that even if she remains bullish on gold prices, the technical picture suggests that the most logical course of action for the metal calls for a pullback in the near term.
“Technical oscillators based on a daily chart are at extreme levels, but even weekly charts, which require a more dramatic incline to move the needle, are suggesting the rally is a bit overheated,” she explained.
She also suggested that it may be risky for investors to get into the market.
“I've already mentioned not being a fan of getting bearish that the current level due to a fundamental belief that gold bulls will eventually resurface, but I must also disclose establishing bullish trades after a $150 rally is a dangerous proposition,” she said.
She also noted that the Relative Strength Index (RSI) on a weekly gold chart may also suggest that investors should use caution and prices could “easily retrace” by $50 to $60 before its rally resumes.
“The RSI on a weekly chart is in the mid-60s. A reading of 70 on a weekly chart is considered ‘off the charts’ in terms of extremes -- and is a rather rare manifestation,” she explained.
But, Garner remains bullish for the yellow metal overall as volatility in financial markets continues. Investors that had previously liquidated their gold positions, she continued, might now be looking to “dip their toes back” into the market.
“If so, it should give a lift to gold,” she said.
By Sarah Benali of Kitco News; sbenali@kitco.com
Follow me on Twitter @SdBenali
