July 21, 2014 in Trading with Other Commodities
The gold price has rallied strongly in recent weeks to hit a high of $1322 per ounce in recent weeks. Renewed demand from Jewellers and producers together with increased global political tensions have caused the yellow metal to rally from lows at $1193. However despite recent gains the metal still remains far from the recent highs of 2011 when it looked certain to hit $2000 per ounce.
Give the metals fall from grace over the past 24 months the question as to whether the current rally can be sustained is one that is on many traders lips.
Why Investors Like Gold
Long before the Forex markets the world traded and valued its good and materials in gold. This historical sentiment that surrounds this metal perpetuates, and even in today’s world of FIAT currencies, gold is still seen by many as the ultimate store of wealth. Fear of inflation and the devaluation in paper currencies sees money move into this market. As global uncertainties increase, so too does the demand for gold.
How Much Has The Price Changed?
The price of gold has risen sharply in recent years as the metal has awoken form a long term bear market. The beginning of new bull market can be traced back to 2001. The preceding 10 years saw the price barely move. However since this time the price of Gold in USD has since risen from a low of $385 per ounce to a peak of $1889 at the start of 2011.
A long or Call trade on the gold price would have yielded high gains for the savvy investor.
Can The Current Rally Be Sustained?
Following falls from the high set in 2011, the Gold price has looked firmly in the grip of the bears. However the bigger picture may look brighter for trading gold. Maintaining a price above $1300 looks constructive and a push and a break back above $1400 may provide the impetus for a more sustained price rally.
From a chart perspective price action looks to be forming an inverse head and shoulders pattern. A move towards $1400 would provide support to this view. Gold certainly seems to have found a floor at the current level. With further support from a rising USD and increasing political unrest and financial worries, it could be set for further gains.