Gold Ready to Recapture Levels Not Seen Since 2016

Sprott Money CEO says current landscape is more favorable for gold than two years ago.

2016 was the last time gold climbed past the $1,370 level, brought up by a string of geopolitical concerns and a weaker dollar. But now, having already crossed the $1,340 mark, the metal looks ready to recapture levels last seen two years ago, while also setting new records in the process, reports Kitco.

In an analysis on Sprott Money, Global Pro Traders CEO David Brady explained why he thinks the current landscape is even more favorable for gold than 2016 was. According to a recent Kitco article, despite a robust greenback, which is often seen as one of its main headwinds, gold still managed to surpass $1,340 an ounce since the start of the year.

This display of strength is set to continue, said Brady, who sees gold heading towards the 2016 high of $1,377 this year, largely driven by central bank policies. As Brady noted, the Federal Reserve might be looking at a policy U-turn after hiking interest rates on an annual basis since 2015.

According to Kitco, the recent dovish stance expressed by Fed officials could soon make way for quantitative easing (QE), an inflationary policy that has heavily benefited gold in the past. Brady and other analysts contend that a new QE program will drive prices up, yet without the prospect of higher rates or Treasury yields. This will be the perfect environment for gold to stage its bullish run, said Brady.

The strategist feels that the recent sentiment turnaround among money managers is testament enough that gold is soon heading up. In just fourteen weeks, speculators slashed their short gold positions by more than half, which speaks good things about the metal's direction, reports Kitco.

Past the Fed situation, Brady feels that central bank policies around the world will likewise prove supportive of gold. As the CEO noted, all of these policies are ultimately setting fiat currencies up for depreciation, and gold is often cited as the best and surest protection from wealth erosion.

After hitting the $1,377 mark, Brady expects gold to pull back and potentially test several support levels along the way. This pullback, however, will merely act as part of an over-arching upwards trend that will eventually lead gold to new highs before the end of the year.

Meanwhile, Brady expects the opposite to happen with the dollar index (DXY). After so many months of persistence, the CEO finally sees the DXY peaking and falling to a figure as low as 80, which will be another highly bullish development for gold.