Gold prices remain stuck in the muck and could fall below $1,000 per ounce before finally bouncing back, Dennis Gartman, editor of the Gartman Letter, said on Tuesday.
As Asian trading opened on Monday, a technical selloff sent prices down five percent in minutes. Prices eventually touched $1,085, the lowest price since April 2010.
The resulting techincal shock could lead to an over-correction and push gold prices to levels unseen since before the 2008/2009 financial crisis.
Gartman suggested that gold could fall to an “obscene number” of around $995 per ounce.
“Indeed, it could happen far more quickly than anyone might reasonably deem possible,” Gartman said. “At that point, we’d be wildly bullish of gold.”
The precise reason for the rapid drawdown is unknown but Gartman speculated that the selloff in Asia on Monday was due to forced liquidation rather than new bearish position taking.
“The selling was precipitated in China and took place on the Comex and it does indeed appear to us to have been for margin purposes for we cannot imagine that anyone would have attacked the market that viciously and that indiscriminately without having been forced to have done so,” Gartman said.
Meanwhile, other underlying factors are weighing on the yellow-metal. A Greek crisis was averted with a third bailout, while decades long Iran nuclear negotiations resulted in a historic agreement.
Turning to the US, the dollar saw heavy gains last week after Federal Reserve Chairwoman Janet Yellen predicted a interest rate rise in 2015.
St. Louis Fed president James Bullard reiterated the hawkish tone in a interview with Fox business, saying that the odds of a rate rise in 2015 are “more than a 50 percent probability”.
The tone indicates that the Fed is witnessing a positive recovery after a harsh winter caused first quarter GDP to drift into negative territory.
(Editing by Tom Jennemann)
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