Gold at the highest probability of a 'melt-up' since the 1980s, but don't rule out 10% corrections – Jared Dillian
Commodities are known to top following major geopolitical events but don't discount gold seeing 10% moves in any direction as the market is at the highest probability of a melt-up since the 1980s, according to Jared Dillian, author of 'No Worries' and editor of The Daily Dirtnap.
Gold surged 18% between March 1 and April 12, rising around $400 and hitting new all-time highs on escalating Middle East tensions, record purchases by central banks, concerns over sticky inflation, soaring U.S. government debt, and continued fiat debasement.
Following the rally, major banks have upwardly revised their gold price outlooks. Citigroup is now calling for a $3,000 gold price over six to 18 months, while Goldman expects gold to hit $2,700 by the year end, and UBS has upgraded its year-end target to $2,500 an ounce.
At the time of writing, spot gold had fallen from record highs and was trading steady at $2,330 an ounce.
Banks raising gold price targets is somewhat concerning in terms of sentiment, said Dillian, who is projecting trend exhaustion in the short term.
"Gold is going to top, which will happen at some point in the $2,500," Dillian told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "I focus on sentiment, and it has been getting a little bit hotter. Gold people, including myself, have been a little bit more bullish on Twitter. I think you'll see an exhaustion of bullish sentiment in the short term and then a price pullback."
Dillian, who has a 40% exposure to gold, is continuing to hold his position but is planning to hedge. "I expect about a 10% correction," he said
By Anna Golubova and Michelle Makori
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