What’s up with the Gold price?
Gold prices have hit 100-month highs as investors start flocking to the shiny safe haven asset. A lot of the analysis out there is putting the recent surge down to the tensions in North Korea. And this is certainly a contributing factor.
Furthermore, weak US economic data — as well as two devastating hurricanes in just the last week — has put the chances of an interest rate hike off the table for the time being. That’s a positive for gold prices as bonds and savings accounts are a competitor, in some ways, to gold as a safe place to park your cash.
So, is the only way up?
The contrarian mindset
According to The Economic Times, the following could support a fall in the gold price:
‘One of the other reasons for us to take contrarian call is the outflow of gold from world’s largest gold ETF – SPDR gold shares.
‘Usually when gold is added into the holding, the price increases and vice versa but in between June and August we have seen outflows so that is also one of the conflicting signs that is preventing us in being huge bullish fan in gold.
‘Short term US Dollar index has tumbled from 103.30 to 92.58 which is 10% starting of this year. US dollar is poised to recover according to technical charts and gold always comes under pressure in rising US Dollar environment.’
Though they admit this is a risky play, it is worth giving some thought to. If they are right then the move down could be quite sharp.
The technical case for a move much higher
If you just look at the pure technical data, the gold chart is telling you that gold could go up a lot higher over the next few months.
Take a look at this:
Source: Incredible Charts
This shows the ten year chart of gold since the GFC in 2007.
You can see after rising sharply from 2007 to 2011, gold reversed course and has been in a medium term down trend ever since.
But in the past two months, you can see a breach of this down trend.
This is a very strong signal that the trend could be shifting. To confirm a new up-trend the price will have to rise above the 1370–1380 level. This probably won’t happen at the first go, so this could play out over the next six months or so.
But if it does, a whole host of trading money could jump aboard and push prices higher.
And right now I don’t have to tell you there are any number of global triggers out there that could provide a more fundamental reason for investors to shift to gold.
From Trump, to central bank money printing, to North Korea. Take your pick!
In fact some think the fundamentals of the global economy mean a recession in Australia is actually unavoidable. That would be massive for gold prices and would signal the world economy is in trouble.
Will it happen? I can’t say for sure. But if it does then there could be some serious money up for grabs for investors right now. Before the rest of the herd jump in.
Markets and Money