Uncertainty in the short term but long term certainty
The low gold prices in recent days should not surprise us. As anticipated in my last follow-up, we should reach a trough last summer before starting the next increase, which should carry us well beyond $ 1000.
Basically, nothing has changed, quite the contrary, but the price of gold has consolidated several reasons:
Building a solid foundation to ensure a sustainable increase
First reason: The consolidation of gold required a little more time to repair the technical damage of the fall. Longer will be the basis established at these levels, and higher will be the next move upward.
A retreat is quite possible
Second reason: As long as gold is not engaged in a major rise in pulse, it is likely to revert to its moving average long-term, as the exponential moving average to 200 days moving average at 325 days. Today, these two averages are $ 897 and $ 881 respectively.
Gold could drop to around $ 845 - $ 850 (about 580 euros), without this being regarded as "abnormal" in terms of consolidation and volatility for this metal. But my windows are buying $ 900 and 650 euros, because I believe that these levels offer good entry points for the medium and long term.
Seasonality: Summer is hollow
Reason Three: The summer is usually a bad season for gold. It often wait until the end of August to see buyers back into the market. Traditionally, Indians are returning in September and prices up with their purchases in anticipation of the holiday season and weddings. My impression is that investors have come to integrate it into their trading models, and tend to avoid going into the gold market in the summer, causing a reduction in volumes.
Point of reverse head-shoulders
Fourth reason: virtually all analysts of the gold market had seen the figure potential inverted head-shoulders, is turning upward, with $ 300 Target 1.
Virtually all eagerly awaiting the break of 1 000 $ 1 to see the $ 300 to be served on a platter for dessert.
Gold is capricious
Unfortunately, things are never that simple. The gold market is much more irrational and unpredictable, and we can be certain that when everyone expects a break on the rise, the price we made a foot of majestic nose, drawing a peak last bearish!
I feel that a correction in gold is still waiting for two things to be finished: it has caused enough losses from the latest on who bought the last summit - it's done in 2008 with a dip to $ 680 - and it has lasted long enough to reverse the usual sense among followers of the gold market.
Nothing better than a good depression to boost up
In principle, a correction does not end with a depressed feeling and a new rise begins in the general skepticism. I think a peak drop to $ 900 - $ 880 will be necessary to eliminate the over-optimism in recent months, but it is also possible that we descended lower, although not I prefer that scenario.
In euro terms, I see the maximum exposure to 625 euros.
In the eye of hurricane
Fifth reason: I think we are in the eye of the hurricane crisis. Stock markets are not sure which direction to go, and everyone expects the next statistics / results of companies to see if the worst is behind or ahead.
The gold market is in the same hesitation.
The fundamentals are clearly bullish
There are long-term fundamentals that will undoubtedly push the gold price to rise in coming years (inflation of the money, or large-scale purchases of some central banks, worsening the debt of some States, deterioration in investor confidence in the dollar and all other currencies, prolongation of the crisis, total disgust on the stock markets, which are still far from having reached a low point in terms of valuations ...).
But in the short term, anything can happen
But in the short term, we could see quite a rebound in the dollar and renewed fears about deflation, which would weigh a little on the price of gold, which does not yet have the status of safe higher than the cash.
When you see the eagerness with which people are able to sell their old gold against cash (growing phenomenon since the crisis), you understand that we are still far from the end of the bull market in gold!
The day will be cash or suspect ...
However, when the cash becomes suspect and we hasten to exchange against the gold, silver or anything tangible, we will come to the end of this bull market . But it will take many years because, based on the history of economic cycles, and many ratios, the cycle of the gold bull is far from having reached its end!
Observe the investors on the futures market COMEX
Sixth reason: The trade were heavily net sellers in the market for futures contracts on gold (COMEX).
Gold may climb in spite of this, but in principle it is a warning sign, since often earn their commercial paris. Conversely, when they feel that the price reached a reinforced concrete - beyond which the buyers are too many and put them in danger - they débouclent their positions and it sends a signal to buy a my indicators.
The last time a buy signal has been produced by this indicator was on 7 November 2008, 10 days after the gold has hit its low point at $ 680. It is quite possible that we receive a final signal Purchase this indicator before finally breaking the $ 1 000. If such a signal is sent to us, then there will be aggressive buyers of physical gold, such as signals to buy are rare (one to two signals a year of purchase). I will keep you informed.
Recycling on the rise
Seventh reason: recycled gold was up strongly at the beginning of the year, and it would seem (to verify) that due to crisis in the sector, even the manufacturers of luxury watches déstockent by sending to the foundry their latest creations in gold .
This type of recycling is obviously a very small percentage of the total supply of gold in the world! Anyway, the global market for jewelry is at half mast due to crisis. The demand for jewelry fell sharply, and does not support the gold price if the investment demand has a hollow passenger, as is the case since the beginning of June.
Do not underestimate China
For the longer term, I expect that investment demand for gold will eventually exceed the demand for gold jewelry.
For example, think that China should buy at least 4 000 tonnes of gold to increase its gold reserves to 10% of its reserves.
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About the Author:
I am a Forex Trader.I love currency trading.