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 Monday 14 March 2016

PM Bulletin: Gold

 

 

Here’s a chart of gold going back to when it hit a multi-year high back in September 2011. I’ve drawn on a Fibonacci Retracement from this point ($1,921) to the low hit in December ($1,046).



The 0.24 retracement comes in around $1,252. If we look at this area in more detail, we can see where the significant trading levels come in:

In the chart above, we can see how gold formed a rising pennant formation with resistance around $1,240 – a level which has gone on to act as support – so far.

There are compelling reasons to think that the low hit in December marked the final leg of the multi-year sell-off. Gold has undoubtedly benefited from a flight to safely after the New Year near melt-down in equities. The adoption of negative interest rates by the Bank of Japan, and their extension last week by the ECB has also boosted the argument for owning the yellow metal. After all, why not diversify some of your cash reserves into gold if it’s going to cost you money to deposit funds with a central bank? Yet despite a stunning start to the year, followed by an encouraging break out of the pennant pattern, gold appears to have lost its upside momentum. This could prove to be another well-deserved period of consolidation, and the longer gold holds above $1,240 then the more confidence we can have in it building on recent gains. But much now depends on where the US dollar goes from here. Investors won’t want to push the greenback too far up or down ahead of tonight’s Bank of Japan meeting and the US Federal Reserve rate decision and FOMC economic projections on Wednesday.


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Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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