Gold Looks Cheap In The Current Environment

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Gold Looks Cheap In The Current Environment
Gold Looks Cheap In The Current Environment

Gold Looks Cheap In The Current Environment

Gold prices have paused to take a breath. The 2 month run up from the $1,200oz base in December has stopped short of the key target technical level of $1,360oz. There still remains plenty of momentum in this metal but after hitting a 4 month high of just over $1,345oz yesterday it seems to have temporarily run out of steam.

Favourable US Dollar news late in the session, in the form of positive New Home Sales, eroded some of the gains in the precious metal. The demand for the safe haven store of value eased in the face of strengthening economic conditions in the world’s largest economy.

Falling commodity prices across the board contributed in no small part to the pullback in Gold. Silver spectacularly gave up the fight to break through the key $22 resistance level. After testing this level during 5 of the previous 8 sessions, Silver reversed and plunged through established support at $21.47 and is now looking to be held by the 20 day moving average just above $21.

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Copper failed to be supported by it’s 20 day MA as day 4 of this metals losing streak saw selling accelerate. Platinum likewise posted a loss yesterday despite the ongoing strikes at South Africa’s Platinum mines curtailing supply.

Notwithstanding the forces contributing to yesterday’s Gold sell off this precious remains well bid. There are just too many reasons at the moment to be long this particular commodity.

Uncertainty regarding US weather conditions is driving a portion of some commodity based portfolios towards more stable assets. Uneasiness in emerging markets, particularly the lack of currency stability, is also pushing investors to the safer haven of Gold. Additionally, as the current situation in the Ukraine fails to resolve there is a heightening of the global risk factor, this is a condition that almost always results in higher Gold prices.

These conditions render Gold a bullish commodity, there is a well established trend and plenty of momentum in the current market. The most likely outcome of yesterday’s price pull back is that sideline investors will see it as buying opportunity. $1,360oz remains very much in play over the coming sessions.

To contact the reporter of this story: James Brennan at james@forexminute.com