Market Analysis

Gold springs into life. What now?

The price of gold is rising, and many investors are becoming euphoric despite, or precisely because of, the global growth prospects. The economic outlook is clouding over, and demand is growing for something as crisis-proof as gold. Gold is a safe haven in uncertain times. The question is whether many investors were happy too soon?

Like Sleeping Beauty, the gold price has been ‘asleep’ for years but now it seems to have awoken from that sleep and has now reached its highest level since May 2013. The significant price gains could lead to short-term corrections. As we saw at the turn of the month, this can be accompanied by increased volatility.

Political events can play an increasingly important role here. For example, a worsening of the situation in the Middle East could have a positive effect on the development of the gold price, whereas a solution to major political conflicts such as the inner-Korean border dispute and the associated nuclear policy could hurt the price of the precious metal.

From a chart technical point of view, gold showed a strong upward movement. That too-early enthusiasm for rapidly rising prices might be somewhat premature. Although gold tried twice to break through the US$1435 zone on the upside, there was no sustained buying pressure. The market tended to move towards the critical area at US$1415 time and again.

If the bulls can defend this level, the market could show higher prices. The next significant structural level on the way up that could show resistance to the market is in the US$1450 range. If the market also crosses this hurdle, a more distant structural area of US$1540 could offer resistance to the market.

However, if the market breaks through the US$1415 level and the US$1393 structural line can’t support the market, then support in the US$1345 range is possible. Should this zone also be too weak, two further potential support areas at around US$1288 and US$1241 could help the bulls. If the market continues to go down, the picture would become cloudier.

The MACD oscillator runs parallel to its trigger line. The histogram shows trends towards bearish divergence.


GOLD daily chart Source ActivTrader

GOLD Daily Chart | Source: ActivTrader


Written by Daniel Schuetz, External Analyst, ActivTrades

*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication. All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided.