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Gold prices, in U.S. dollar terms, and stocks are both overbought and traders can expect a correction in the short to medium term, this according to Phil Streible, senior market strategist at Blue Line Futures.
“I just think it’s overvalued at this point. There’s about 311 companies out there that have recently gone into this distressed state. The bankruptcy levels are increasing. I’m quite bearish on U.S. equities,” Streible told Kitco News. “As soon as [the NASDAQ] breaks down a bit, there’s going to be a quick run to the door. I think the S&P 500 should be around 2,500.
Gold prices should be testing the $1,666 an ounce level on the downside and if this floor is broken, the trend could become bearish.
“Gold has really stopped. If you look at that chart pattern, it got over that $1,750 on a closing basis, I thought we were going to run back up into $1,780, we just didn’t do it, we started to slide off. So if you look, it’s got this bearish pattern going on, we’ve got to break that downtrend,” he said. “I really think that gold is not going to be this great asset.”
While in the U.S., stimulus measures have largely been priced into gold since the Federal Reserve has already “thrown everything in,” Streible noted, other countries are about to follow suit and so gold could see price appreciation vis a vis foreign currencies.
“I think gold futures are not going to be as robust as they once were [in U.S. dollar terms], but if you look at gold versus the euro, right now it’s 1,575, the all-time high gold in euros is 1,625. I think that’s your play, gold versus the euro, it will continue to go up,” he said.
The stock markets are really not factoring in the extent of the damage that the economy has suffered due to the pandemic, Streible said.
“It’s very easy to destroy an economy, but it’s very tough to rebuild an economy. Many of these jobs that are lost are not going to come back,” he said, adding that consumer discretionary spending will likely remain weak until December.
By Kitco News
For Kitco News
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