In light of gold’s negative reversal on Tuesday, the odds of a more meaningful correction in the yellow metal have increased, according to UBS analyst Edel Tully.
In a note to clients, Tully wrote that gold’s rally in recent weeks “surprised most in the market, even those in the most bullish camp.”
She went on to say that ‘Given the speed of the recent rally, the possibility of a correction is rising as investors look to bank profits.”
However, the UBS analyst noted that “Even if a $150 or more pullback were to materialize, we’d strongly view it as a good buying opportunity.”
A pullback of that magnitude would take the price of gold from its new record high above $1,900 to at least $1,750 per ounce.
With regard to silver, Tully wrote that as for those traders and investors who missed out on gold’s recent run, “Instead of playing gold from the short side, they prefer buying silver. That trade may well extend this week.”