Gold prices reached another five month high earlier today as the dollar was weaker and stocks started the day mixed. Gold prices eased throughout the morning, however, as stocks rallied in anticipation of tomorrow’s ECB announcement. It is expected that ECB President Mario Draghi will bring the bazooka and announce a bond buying program to the tune of 50 billion euros per month until the end of 2016.
The ECB is taking additional action in order to fight deflation, and hopes are that this package will get the job done. While this may be considered bullish for gold prices, the possibility certainly exists that this stimulus has already been baked into the cake and that the euro currency could potentially stabilize following the release of the QE package.
Should this prove to be the case, gold prices may see a further upside as some profit taking in the dollar could occur. Recent dollar strength has likely acted as some degree of resistance to higher gold prices, yet the price of gold has continued to rise. This could potentially be indicative of underlying strength in the gold market. In addition, gold has also risen as crude oil prices have fallen in dramatic fashion-also a potential sign of market strength.
Gold appears to have put in a meaningful bottom back in November and December. High volume seen in December may be a good clue that gold has once again begun to be accumulated. Gold prices have been trending higher ever since, and have cleared some significant areas of resistance.
The $1320 area in gold would seem to be the next possible upside target for gold prices. On the downside, support may be seen in the $1260 and $1240 areas.
Gold has been moving higher as risk aversion sets in and some investors possibly look to reallocate assets to begin the new year. The move last week by the Swiss National Bank (SNB) did not do anything to calm investors’ nerves. After abandoning the franc’s peg to the euro, the Swiss currency rapidly rose by 30 percent at one point.
In addition to action in the currency markets, stocks have been seeing increased volatility as well. Markets have come off of their recent highs, although it is too early to tell if the possibility of a top exists.
Another factor that may be driving gold prices is the notion that the Fed may remain on hold with regards to interest rates. The lack of inflation, along with increasing global growth fears could potentially delay the first rate hike slated for sometime in the middle of this year. Should the Fed decide to wait, the dollar could potentially weaken and in the process possibly set the stage for higher gold.
Gold prices have been on the defensive for some time now, although the gold bulls are showing some signs of life recently. The price of gold retested its swing lows in the $1183 area during the night session recently before popping higher throughout the session. While no one can not say with any certainty if a bottom is in fact in place, this is noteworthy for a few reasons:
Stocks and the dollar will likely continue to be the primary drivers of gold. Should stocks continue to weaken and exhibit increasing volatility, then gold could potentially benefit. Either way, the gold market had gotten oversold and will possibly need to overcome that oversold condition before another leg lower if that proves to be the case. In the meantime, we could potentially see a sharp rally in gold that could take gold prices higher by $100 or more in the near term. The gold bulls have a lot of work to do to overcome the technical damage that has been inflicted on the yellow metal, and gold will likely remain a seller’s market until the bulls are able to prove otherwise.
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There are many potential reasons to own gold. Some of these reasons can make sense and seem very reasonable, while others seem to be a lot more far-fetched. In this post, I wanted to kind of break down some simple reasons that in my opinion may be good reasons to buy gold, silver, or other precious metals. Again, these are my opinions but I think they represent a simple line of thinking that may be useful for those considering gold ownership or precious metals investments, or for those who have already started to buy gold. To me, there many potential reasons to own gold but here are what I feel are the simplest reasons to own gold:
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I strongly believe that we are heading into another financial crisis which could be even worse than the last. Baby boomers are aging and most do not have nearly enough saved for retirement. The National Institute on Retirement…
FOMC minutes show Fed to complete tapering by October. Rates to stay low for an extended period.
From Marketwatch.com: Fed plans To end bond purchases in October
Gold prices are moving higher today before the release of the latest FOMC minutes. Gold is up over $8 per ounce as of this post and is hovering just below the April highs. The April highs in the $1331 area appear to be some formidable resistance-and if the gold bulls cannot take out this level soon we could potentially see some liquidation by gold longs. Watch the gold market’s reaction to today’s FOMC minutes here:
It would seem that the summer doldrums of trading may already be upon us. The markets have been relatively quiet, and the news flow also even seems to have quieted down a bit. The release of the Fed minutes today will quite likely be the data highlight of the week. Fed Chairwoman Janet Yellen has previously reiterated the idea that the economy still requires the Fed’s assistance. While anything is possible, we would expect that today’s minutes will simply be more of the same. The Fed will likely continue to get out of the bond buying business while pledging to hold rates low for the foreseeable future. This could potentially be bullish for precious metals.
It is difficult to imagine gold and silver falling off dramatically from current levels given the current geopolitical landscape, however, anything is possible. The bulls are maintaining a slight technical advantage, however, we feel that the gold bulls must be able to extend prices to the upside out of the current trading range and do so in the very near future. Should the bulls be able to breach last week’s high on a closing basis at the $1333 level as well as the high reached on July 1 around the $1334.9 level, we could see gold rise sharply and do so quickly. This could potentially put the $1354 area in the bulls site. A breach above this level could see a test of the $1400 level in short order. On the flip side, gold may see near term support near Friday’s low of $1312 and then again at the $1300 level. A break below this level could potentially set the stage for a significant decline.
The gold market has been under bearish pressure once again lately. The market recently broke some key support in the $1280 area, and thus far has not recovered. The market has, however, thus far held smaller support in the $1240 area. The gold market simply appears to be lacking any real bullish catalyst right now that could help the metal begin to stage a meaningful rally. While this can certainly change quickly, it would seem that for now the path of least resistance in gold may continue to be lower. We could be in for another test of the $1200 level-and should this level give way the price of gold could potentially go significantly lower. Sub $1000 gold becomes a real possibility….
Let’s examine some of the current headwinds facing the gold market:
While there are certainly other factors at play right now, these are some of the biggies affecting bullion currently. The fact is that stocks continue to move higher into new all-time-highs territory, and the economy continues to show signs of improvement. The data stream has seen some rough patches but all things considered the trend seems to be toward ongoing improvement. Markets and investors are looking forward to Friday’s non-farm payrolls data at this point to try and gauge the strength of the labor market. The labor market has remained a cause for concern for investors, but a good number on Friday could potentially send stocks soaring and keep the pressure on gold and silver prices.