(Kitco News) - While the longer-term outlook for gold remains strong, seasonal factors along with the strength in stocks and the U.S. dollar mean the precious metal could retest $1900 before it goes higher, according to Sean Lusk, co-director of commercial hedging at Walsh Trading.
“From a seasonality perspective, you run higher the second half of summer, with better physical demand,” Walsh told Kitco News on September 1. “We haven't really seen that seasonal bounce until very recently here. Seasonally, you back off a little bit in September after the run-up into the Labor Day weekend. But with everything else going on globally, you have to throw seasonals out the window a little bit.
“10% higher on the year in gold is just above $2000, at $2008, so I think we can achieve that,” he said. “And if we keep going, we can make a run for $2050, $2100.” Walsh is also concerned about the potential impact of the global economy on gold prices. “China is doing everything they can to support their economy,” he said. “While our Fed is raising rates, they're cutting, they're trying to create a more inflationary environment. They're a big producer of gold, but they're also a big consumer.
Lusk said that the Fed trying to create a soft landing for the U.S. economy, but this is proving very difficult while Washington continues to print money. “That's the tug of war that's going on right now,” he said. “I think longer term, because of that uneasiness, as we get in the later third quarter and into the fourth quarter, there’s potential for some contagion here, on the fact that the Fed is going to keep going, and they're not going to pause until they take down inflation.
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