Gold Prices Headed Towards $3,800 per Ounce as Technical Risks Mount, Analyst Says

Gold prices declined by over 3% to $4,632.5 per ounce on Wednesday after US President Donald Trump failed to offer certainty over the US-Iran war. At one point, Trump said the war could end in a few weeks, but in the next moment, he warned of hitting Iran 'extremely hard' before pulling back.

Trump's speech 'basically framed the conflict as a military success story, not a ceasefire announcement,' said Oversea-Chinese Banking's Christopher Wong. 'Gold had an impressive run-up to a $4,800 intra-session high. From here, the momentum may moderate given the possible curtailment of risk appetite on fears of a US ground operation in Iran.'

After the biggest monthly loss since the early 80s, gold prices trended higher in recent days, but the momentum faltered mid-week as analysts warned the price correction is not yet over.

Avi Gilburt, founder of ElliottWaveTrader, told a media outlet he sees two distinct technical paths that could drive down gold prices below $4,000 per ounce, towards $3,800. His price target implied another 20% decline in gold prices from current levels.

Gilburt is closely monitoring current price action, as the first technical path would see gold prices hit resistance near current levels and then trend down, warning that the second path is more severe. Interestingly, he is looking for gold prices to reach the $4,800 resistance level, then rise to $5,200 before crashing hard.

'This path is more evil or deceptive, because the higher prices will convince everyone that the correction is over, but it's really just getting started,' he said. According to the veteran analyst, the outlook for silver mirrors that of gold, with downside risk toward $53.50.

However, Gilburt stressed that if his target level holds as support, it could offer a buying opportunity, although the rally that follows will be crucial in deciding if the broader trend stays bullish or shifts into a longer-term bear phase.

For long-term investors, he sees value in silver below $60 but does not rule out a major pullback toward $40. 'For silver, long term—over the next 10 years—anything under $60 will represent a great buying opportunity,' Gilburt stated.

Mining Stocks Could Outpace Metals

Gilburt explained that there are opportunities in mining stocks, since they could outperform the underlying metals during the next rally, highlighting that some mining stocks have already bottomed, while others remain in corrective patterns. This development could offer selective buying opportunities in this sector.

'There are a number of mining stocks that can potentially outperform both silver and gold,' he said, adding that opportunities exist across producers and developers.

Furthermore, oil prices could move higher in the near term, but Gilburt forecasts a major decline later this year, with the potential for prices to fall below $50 per barrel.

In all, Gilburt said his outlook is based on technical analysis rather than macro narratives, with key inflection points in precious metals and stocks expected to emerge in the coming months.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.