Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is the Gold Correction Over?

Commodities / Gold and Silver 2010 Jan 15, 2010 - 03:11 AM GMT

By: Seven_Days_Ahead

Commodities

Best Financial Markets Analysis ArticleThe Technical Trader’s view:



WEEKLY CHART

The underlying bullishness of the market is derived from the massive H&S reversal that suggests a minimum move up as far as 1313.

The first impediment was the Fib cluster at 1221-1232.

But the pull back found support exactly where you might expect – the first Prior High at 1072.60.

Look closer.

DAILY CHART

The market bounced off that support from the Prior High, and when the resulting surge faltered, not well how the Prior High at 1114.50 was support again – ratcheting the market better.

There’s no clear reversal in place yet, but the market appears supported for further bull trending in both the short and the medium-term.

The Macro Trader’s view:
Gold is a market that has enjoyed a clear underlying Bullish trend since early 2004. Along the way there have been several corrections lower, some of them relatively steep, but the market has on each occasion shaken off its malaise and resumed its bull trend.

More recently, Gold has tested the lows after making an all time high in December 2009. And earlier this week, it looked set for a fresh rally, but the market has slipped, what lies behind this price action and should bulls be concerned of something more profound emerging?

The rally in Gold has been driven mainly, but not entirely, by the weakness of the Dollar. So it is no coincidence that Gold began its correction at the same time as the Dollar began its own recent correction after a stronger than expected US Non-Farm Payroll report at the beginning of December 2009.

However, the strength implied by that December payroll report hasn’t uniformly followed through in subsequent data releases. Once again, this has led to questions being asked about the strength of the US recovery which has resulted in the Dollar giving back some of its gains.

But the recent strength of Gold wasn’t just due to the Dollar’s price action. As the New Year began traders became more concerned about the level of government debt in many of the developed economies, but especially in the US.

With the current US administration set on a path of almost never-ending debt accumulation, the credit rating of the US has been subjected to scrutiny as never before.
The build up of debt, especially in the US, worries investors because they fear the US could be building up a problem it might struggle with in subsequent years. They think the financing of that debt could and probably will drive up long term yields, stifle recovery, hinder productivity and unleash inflation.

All of these fears are reasons to go long of Gold. But just as this market looked set to rally further, the gains were given back. Once again weaker US data was to blame, causing a deeper sense of angst about the recovery.

However, even if it is right to begin fretting about the strength of recovery (and we currently do not hold that view) the long-term outlook for Gold remains Bullish. If ,as we expect, the recovery gradually builds, traders will focus squarely on the budget deficit and debt, which will undermine the Dollar and support Gold.

If, on the other hand, the recovery falters or turns out to be much more anaemic than current expectations, then the outlook for the deficit and debt looks even worse as policy makers would be tempted to pump prime with yet another unaffordable fiscal stimulus.

In such a circumstance we believe the US would be in line for a sovereign debt down grade, the Chinese et al would voice their concerns about the Dollar’s long term value even louder and Gold would make new highs.

Timing as ever is the key. For now we think this correction has a little further to play out. But don’t be fooled into thinking this is a bear move: it isn’t.

Philip Allwright
Mark Sturdy

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in