NEW YORK (Kitco News) -- Gold has been doing exactly what it should be doing, says Axel Merk of San Francisco-based Merk Investments.
The recent choppy, sideways trading and Thursday's gold rally suggest the market has put in at least a near-term low. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,130.00.
Merk explained, 'I like gold because I don't think we can have positive real interest rates - which ultimately is a competitor to gold.' Merk also added that he is waiting for the U.S. Fed to 'acknowledge' that it cannot pursue a hiking cycle, at which point, 'gold will rise in earnest again.'
Despite a rally in equity markets Friday, gold has managed to hold its ground around the key $1,100 area, with Comex February gold futures last trading at 1,098.30 an ounce -- relatively unchanged on the day. In the first month of trading, gold has been one of the best performing commodities.
Merk said he encourages investors to stick to a plan when the markets are in turmoil, but only if investors have been on a plan all along. 'Let's assume for a moment that an investor has done his or her homework, possibly even sat down with a financial planner or given his or her money to someone to manage. We are all good then, right? I'm afraid that may not yet cut it,' the portfolio manager said.