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Gold rallied more than 1% on Monday, bouncing back from last week's declines. Equities markets are also seeing gains.
Gary Wagner, editor of TheGoldForecast.com, said that he prefers to buy into strength.
"Gold is up $18 [an ounce]. The most important takeaway for me is not so much the current high, but the intraday low that it hit in trading earlier this morning when it touched down the 100-day moving average," Wagner said.
The consolidating at the 100-day moving average initiated short-covering orders for gold and a "buying the dip mentality", Wagner said.
"For me, what we are seeing today in gold is a relief in the congestion and selloff we saw last week," he said.
Wagner does not recommend selling on this rally.
“Personally, I believe in buying the breakouts rather than selling into strength. The key to today’s move in gold is twofold. One, the fact that it hit an intraday low at the 100-day moving average it bounced off, and the second factor is it’s now trading above Friday and Thursday’s high of the day,” he said.
Gold and equities, which traditionally have moved in opposite directions from one another, have been moving in tandem recently. Wagner attributed this to monetary policy intervention.
“The only time you really get a correlation where you get both U.S. equities and gold and silver running in tandem to the upside, is when you have central bank intervention and quantitative easing,” he said. “That is the unusual circumstance where borrowing power is very, very inexpensive, the cost of borrowing is zero, basically.”
Quantitative easing will entice equities traders to push stocks higher, as well as gold investors to buy the metal on the back of inflation fears.
On equities, Wagner prefers the technology sector.
By David Lin
For Kitco News
