New York trading today took gold up past its 200 day moving average and it was sitting at well over $1180 at the time of writing and potentially trending higher with short covering coming in with the moving average breach, coupled with a weaker dollar, poor US retail sales figures, equity market weakness in Europe and Asia and the S&P and the Dow opening in the red today, and falling. Equity markets have been decidedly choppy of late and with predictions of a major market collapse gaining more and more media coverage as the major indexes have failed to make any significant upwards progress this year – indeed most are down – we could be seeing a bit more safe haven buying of gold and silver, which could accelerate with fear stalking the equity investors. (We should point out though that those looking for a major equity market crash have mostly been saying this for the past three years – but they will almost certainly be correct one day – the question is: is that day now upon us?).
Technical analysts will have seen the 200 day moving average breakthrough as being significant and the next likely serious price resistance is at $1181 and $1185, but if the upwards impetus continues these could be breached too and then there could be a further block at the psychological $1200 level, but momentum is positive and if this is level is broken we are perhaps looking to $1245 for the next major resistance – depending on whose technical theories one listens to.
Indeed gold’s progress from it $1070s low back in August – at a time when all the mainstream analysts were looking for much lower prices still – to around $1180 with still positive momentum as I write has been remarkable, given price trends through the preceding nine months. There is a chance that Asia may instil something of a correction overnight, but today’s break through the 200 DMA appears to have been pretty decisive and if the momentum is maintained we could even see $1200 gold again this week. But – even at $1200 gold would still be only around where it closed at end 2014. It still has a way to go beyond that to recover much of its investment allure lost over the past four years.
Silver has moved back above $16.00 following gold’s upwards path but gold:silver ratio has stayed over 73 suggesting that there could be more growth in the silver price still vis-a-vis gold.
With gold, one always needs to express a degree of caution given the multitude of vested interests which have been playing the futures markets – will they be back again selling vast amounts of the precious metal which they don’t have? Or will they perhaps see now as the time to jump in and take the price up further. Physical gold may well be in relatively short supply which could determine the position, but as always, remain cautious on a sustained rise – although as we pointed out in another recent article Elliott Wave analyst Peter Goodburn of WaveTrack International is convinced gold, and the other precious metals, are all gearing up for a major price surge (See: Elliott Wave Analysis: No Coincidence Gold Traded into July Low then Begins Uptrend)
With gold there are going to be as many naysayers among the analysts and economists out there as there will be those taking a positive viewpoint. It tends to be up to what one believes deep down as to which way you turn. The latest price moves could just be a pretty sharp correction within a bear market, or perhaps the beginnings of a new bull market. This writer favours the latter – but gold price predictions are a mug’s game. The only thing one can say is that gold has very definitely performed better than general equities on most exchanges this year. That shows every sign of continuing given the cracks in the global economic framework. Gold (and silver) supporters should probably keep the faith!