Gold analyst argues for this critical price level; gold remains suppressed as strong dollar ‘presses’ price – David Erfle

(Kitco News) – As gold dips below its $1,675 support, David Erfle, founder of, said a strong dollar weighs the precious metal. Gold and the US dollar often move in opposite directions.

“The dollar has been the biggest weigher on the gold price,” he explained. “And of course the Federal Reserve continues to raise interest rates.”

Over the year, the US Dollar Index (DXY) gained 14.3 percent as the Fed raised its key interest rate by 225 basis points. The DXY is now close to 110.

Erfle pointed to $1,675 as a key support level for gold, which has been “tested five times before”.

“The last five times when it came to testing, we saw strong buys coming in right away,” he said. “That’s not happening today.”

Erfle spoke with David Lin, anchor and producer at Kitco News, at the Precious Metals Summit in Beaver Creek, Colorado.

The Fed and Precious Metals

Gold is not an inflation hedge, but rather “a hedge against stagflation” and “a hedge against investors losing faith in government and currencies,” Erfle said.

“Investors still believe the Federal Reserve is in control,” he said. “I expect an increase of 75 basis points” [at the Fed’s next meeting]. If it’s a 75 basis point increase, it could be a buy-the-news situation as far as gold is concerned.”

He explained that after the next Fed meeting, gold could buy more if investors “pick up some cheap gold.” Erfle said gold’s “fundamentals” are improving, pointing to mounting political tensions domestically.

“[The domestic political situation] is ripe for a trigger to push the gold price up because the bearish side of the market is so crowded,” he said.

gold mines

Erfle pointed to rising costs, combined with a “sideways price of gold,” as a problem for prospectors’ profit margins.

“We haven’t had such inflation in 40 years,” he said. “The price of gold must go up… As for exploration, [miners are] cutting down exploration programs.”

However, he said that miners have “a lot of money” to bet.

“While the situation is very similar to that of late 2015, the fact that many of these companies have a lot of money is different,” he said. “I wouldn’t want to be a company looking for money right now.”

Watch the video above to see Erfle’s stock selection.

Follow David Lin on Twitter: @davidlin_TV

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; nor Kitco Metals Inc. neither the author can guarantee such accuracy. This article is for informational purposes only. It is not a request to exchange commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article assumes no liability for losses and/or damages arising out of the use of this publication.

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