Gold cracks $1300
Gold markets recovered during trading over the last 24 hours, reaching above the $1300 level yet again. That being the case, it looks as if the market is ready to reach to higher levels yet again. After all, we had recently seen a significant break down, and even a bit of a trend line break. However, we have since recovered from the $1280 level, and now have of course broken the major figure.
There are a lot of concerns around the world right now as far as global growth is concerned, and of course with so many central banks looking loose, that makes a bit of a run towards precious metals somewhat inevitable. Larger traders are trying to protect their wealth, and gold is one of the first places they will go. While this is not necessarily an indictment on demand for gold, it is an indictment on the idea of cheap money, which of course can erode wealth over time. Cheap money brings on inflation, and it’s obvious that the central banks around the world are trying to cause this as we are somewhat deflationary at the moment.
There is a certain amount of resistance above in the form of a gap, near the $1340 level, and that should be rather difficult to break out above. However, longer-term charts do suggest that perhaps we are going to go higher over the longer-term, and of course the road ahead is going to be difficult, it’s never easy. Pullbacks should continue to offer value the people will take advantage of, especially if we can stay above the vital $1280 area.
The US dollar
Always pay attention to the US dollar, because it has a massive influence on what happens with gold, and as it rises it tends to be a bit of an anchor around the neck of gold traders. However, the fact that the European Central Bank is looking to keep things loose as well almost guarantees choppiness in the value of the US Dollar Index, and by extension will guarantee some choppiness over here. Remember that gold trades in multiple currencies, so this is that the only chart out there. Obviously, it’s the largest market for gold, so the US dollars the most important currency, but you can also buy gold in Euros, if you choose to trade in the CFD market. With that being the case, the trade may be against another currency.
The take away
The main take away is that gold looks healthy right now. We’ve had a significant pullback after a huge run higher, but quite frankly we have recovered most of the negativity, and at this point it looks like value hunters will be trying to pick up gold on dips as they will start to recognize that we clearly are in and uptrend and that has been confirmed over the last couple of days. The 50 day EMA is just below, and the 200 day EMA is below the last swing low, both of which are very bullish signs and should continue to have traders coming into the Gold markets and trying to pick up value. Longer-term, we are probably looking at a move towards $1400.