Since September 2011, gold prices have been falling for 10 months in a row after hitting the top around $1920/oz. For now, the price is fluctuating around $1554-1600/oz. What hiders another gold rally? Who is currently dominating the market, buyers or sellers? together with Henyep Capital Markets UK Ltd. will try to answer these and some other questions.
Reasons For Lower Gold Prices
The major reason for the price decline is the strengthening of the US Dollar, which is negatively correlated with gold. The eurozone and global crises cause a deficit of US dollars around the globe (as it is the world’s major means of payment. By the way, that is the reason way the world’s major stock indexes (S&P500, RTS, MICEX etc) as well as stocks, the futures on gold, oil silver and other commodities keep losing value.
Technically, gold needs to break out of the sloping channel and consolidate above 1639, a major level of resistance.
Is the crisis over when the eurozone stats are reassuring?
The eurozone’s manufacturing production report suddenly showed a 0.6% increase even though analysts had anticipated another decline. In the meantime Moody’s Investors Service cut Italy’s credit rating while the IMF confirmed its negative forecast for Italy’s economic prospects.
The global production of gold keeps growing even though the prices haven’t grown since September 2011. China has boosted its gold production by 6.6% this year.
According to , the only major fundamental support for gold is the hope that the Federal Reserve will eventually start another round of quantitative easing in order to stimulate the US economy. That is why speculators will wait till August 1st or the escalation of the situation around Iran. If neither of these events takes place in the short run, gold prices will probably go down to $1500 and $1480/oz.
