David Erfle: Strong Hands Snapping Up Gold, Price Drivers and Trends to Watch

Now trading around US$1,830 per ounce, gold has pulled back since pushing past US$1,950 on February 1.

For David Erfle, editor of Junior Miner Junky, the yellow metal's decline makes sense. "Basically it's consolidating a huge move," he explained at this year's Prospectors & Developers Association of Canada (PDAC) convention.

He sees fairly strong support for gold at the US$1,780 to US$1,800 level, and said US$1,850 and US$1,900 represent points of resistance. "If we get a weekly close above US$1,900 that would bring more bullish sentiment back into the market," Erfle said.

Of course, US$2,000 is another important price point for gold, and has been for over a decade.

"We've had daily closes above US$2,000, we've had weekly closes above US$2,000 — we've yet to have a monthly close above US$2,000. Once we have a monthly close above US$2,000, I think then we're going to have the move that everybody's been expecting," Erfle told the Investing News Network on the sidelines of the event.

When it come to gold's key drivers, Erfle pointed to central bank buying, which has been in focus since last year.

"It's been interesting, because you're seeing exchange-traded fund sales continue to fall — that's retail money selling their gold. But then you have central banks buying that gold," he said, noting that this trend has continued into 2023. "That's what you want to see — you want to see the weak hands get rid of the gold and the strong hands buy the gold."

He also mentioned the US Federal Reserve, saying he believes it will have to pivot on rate hikes soon. "If they pivot a lot later than they should have, then it could mean the worst for the economy. Basically, the gold price, I think, is sniffing out that the Fed is eventually going to have to pivot," Erfle said, adding that gold always does what it should do in the end.

"Basically that US$2,000 price level has been a strong ceiling for so long that once it finally does become a floor I wouldn't be surprised to see gold take off toward US$2,500 rather quickly," he said.

Watch the interview above for more of Erfle's thoughts on gold, as well as how he's approaching the sector from an investment perspective. You can also click here for the Investing News Network's full PDAC playlist on YouTube.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.