CITI: Gold Has Never Stayed Below The 'Stairway To Hell' For Very Long

Sam Ro | May 24, 2013, 2:39 PM | 7,476 |

The drop in gold prices since the beginning of the year has broken the spirits of investors seeking it as a safe haven for their wealth.

Short positions are at all-time highs, and the chartists will tell you that there has been "considerable technical damage" done.

However, Citi's Tom Fitzpatrick sees some hope in his charts.

"On a medium-to-long-term basis we remain very bullish on Gold," writes Fitzpatrick via King World News. 

He considers a recent price pattern, which would suggest prices could go much lower before goin higher.

"That low (in gold) was hit at $682 in October 2008, and within 3 years Gold had rallied to $1,921," he wrote.  "A similar fall and rally would see Gold at $1260 near-term and then above $3,500 by 2016."

Fitzpatrick believes this bullish trend will be supported by fundamentals.  Specifically, the debt and the debt ceiling.

"As can be seen from the chart [below], Gold has never stayed below that “stairway to hell” for very long," he wrote referring to the statutory debt limit.  "Given that the debt limit number is going to continue higher, a re-emergence of Gold strength looks inevitable.  A lot of “considered opinion” suggests that by the end of the present electoral term (end of 2016 when new presidential elections take place), that the US debt limit will be at around $22 trillion USD."

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