Gold bulls breathed a sigh of relief on Tuesday, as the metal rose on the session, and managed to avoid hitting a fresh eight-month low (which has become a common occurrence for gold over the past week). But according to commodities expert Andy Hecht, gold is set to head much lower in the weeks ahead.
"Right now, my best trade is just being short gold," said Hecht, a longtime veteran of the Phillip Brothers trading desk, and the author of "How to Make Money with Commodities." "I think that we're going to go through the $1,185 support which was the low on December 31st of 2013, and I think we're going to head to four-year lows, which will bring gold to around $1,045" per troy ounce.
Hecht points out that many precious metals are already trading at four-year lows, including gold's "little sister," silver, which lost as much as 6.5 percent in two sessions on Friday and Monday before staging a mild recovery. In fact, Hecht looks to the ratio between the price of gold and the price of silver in predicting that gold is set to slide further.
"Gold has been moving lower, but it's been getting more expensive when it's moving lower," Hecht said Tuesday on CNBC's "Futures Now." "And that reason for that is the gold/silver ratio. It's at four-year highs at 68.7-to-1. The median level that I like to look at in that relationship is 55-to-1. That's kind of where it is over the last 35 years, where it's mean-reverted."
Now that the ratio is so far above its historical average, "that tells me that silver is either cheap, or gold is expensive. And given the fact that silver broke down through the $18 to $18.50 support on Friday, it's telling me that gold is just too expensive here relative to silver."
For Hecht, this is confirmed by the decline in platinum. Platinum's premium over gold has fallen to $110 from $222, indicating that it is gold's strength that is unusual, rather than silver's weakness.
Finally, Hecht points out that a strong dollar continues to weigh on the metal, given him a final reason to be short gold in the near-term.
Still, the commodities expert makes clear that he's not perpetually bearish on gold.
"If we get down to [$1,045], I'm going to load up the boat," he said.