‘The Time To Own Gold Is Now’: Greg Weldon Sees Breakout For Bullion

Gold shares an inverse dynamic with the dollar. When the dollar goes up, gold moves lower — and vice versa. In recent days, however, this dynamic has become stressed.

When the dollar moves lower, gold — which is denominated in the U.S. currency — has traditionally rallied as it becomes cheaper for non-U.S. investors to buy the precious metal in alternative currencies.

In early October, when the dollar index (DXY) hit an 11-month peak of 107, gold was languishing at $1,850 an ounce. By the end of November, the DXY had fallen 4.5% to 102 and gold had rallied 10% to $2,050. Tracking this movement in gold were exchange traded funds such as the SPDR Gold Trust (NYSE:GLD).

Low Trading Volumes

“Gold has had fits and starts all year because the dollar comes off and then it rallies again,” said Greg Weldon, CEO of Weldon Financial. “So people have become disappointed and left thegold market”

Weldon explained that open interest in the gold futures market — that’s the total of all long and short positions, a measure of trading volume — has been very low since the recent push to $2,000. On Nov. 22, open interest fell to 154,000.

Then on Monday, something seemingly extraordinary — but not uncommon in low volumes of trade — happened to the price of gold. It opened at $2,075, then jumped 2.7% to a record high of $2,130, before crashing back down 5% to close at $2,024.

Also Read: Gold’s Record High: Why Haven’t Gold Miners Followed Suit?

This was one of gold’s other key risk facets at work — geopolitics. When the world seems an unsafe place, there’s safety in gold. It is one of the most popular haven assets for investors to store their cash in times of turmoil.

The timing of gold’s rally on that day coincided with a Houthi drone attack on several ships in the Red Sea. The drone was later shot down by a U.S. warship, leaving investors to focus on a renewed rally for the dollar. The gold price slumped.

“This market’s wiped clean I think — people are not involved, they’ve liquidated ETFs, we have a monetary situation where the narrative has shifted, geopolitical risk… You have a lot of things going on here with China pulling the puppet strings,” said Weldon.

“And I think the time to own gold is now, because if you get above $2,060 this thing could take…