Gold
has been doing well of late, with the price showing a rise for the sixth week
in a row on Friday last.
Tensions
in Ukraine, softer tones from the FOMC about raising interest rates, a mooted
transfer of liquidity out of equities into gold on the back of nervousness
about the elevated levels of the equity indexes and now, a reminder of the
darkest days for the Eurozone in the recent past, courtesy of Banco Espirito
Santo of Portugal. All of these things are expressed as reasons for the current
allure of gold.
It
can all change so quickly, of course. The factors mentioned can cease to be of
concern to market participants. Some of them can change completely, to become
the opposite of what they were.
In
the meantime, Technical Analysis indicates that the precious metal is heading,
once more, to its 200 period Exponential Moving Average (EMA) on the weekly
chart (above). This indicator has been a solid level of resistance in the
past. At the very least, gold bulls
would need to be aware of its existence as well as its power, and take
appropriate precautions.
Those
of us who skeptical about the value of gold might consider looking for short
positions in the not-too-distant future.
Is the floor in for the precious
metal?
That
said, it would also appear that a floor for the price could have been
established. On the chart right now it is indicated that it might be at 1180 US
dollars per Troy Oz, which is not so far away from the psychologically
important round figure of $1000. It is not out of the question that this
represents the long-term “fair value” for gold, in something like the same way
that what would have been regarded as an outrageous price for oil not too long
ago, centred on $100 per barrel, has now been established as something that is
approaching the norm.
Time
will tell.
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