Gold futures for April delivery closed down today. As of this writing, futures are trading down $8.50 per ounce at $1,605.30. Although the yellow metal closed down on Friday, this week did mark three weeks of gains for the precious metal. Clearly the continued uncertainty surrounding Cyprus is adding fuel to the fire as the metal has been bought on safe-haven demand.
It appears that Cyprus will go forward with the “haircut” to certain depositors on Monday. This is truly unfortunate for all those around the globe that entrust their money to financial institutions. It truly is damaging to depositor psyche. What is to say that this can’t or won’t happen again? The possibility certainly exists as several of the peripheral EU countries continue to struggle. Food for thought. Let’s hope that this is a one time event as it has been described….
This past week gold has gained some bullish momentum but still has an uphill battle to fight. The trend on the daily charts remains down. The trend on the weekly chart remains down as well. It should be noted, however, that the weekly chart does seem to show more of a range-bound activity than anything else. The $1550 area represents the bottom price point of that range.
Perhaps we will continue to see bullish development in the yellow metal, which could set up a move back to the top of that range at the $1800 area. Looking at the monthly time frame, gold is still in a bullish posture, however that posture has substantially weakened recently. That being said, the longer term trend does remain higher. A breach of $1500 on the downside would change things, but for now the market appears to be finding some degree of demand. As referenced in the comments on the weekly chart, the monthly too has been range bound since October, 2011.
It is hard to say what the catalyst may be for gold to break out of these trading ranges. Even with improving economic data, it is hard to imagine the longer term trend in gold changing given all the money printing that continues to take place. In addition, I think most people would agree that with or without a solution in Cyprus, the markets have not heard the last of the European sovereign debt crises. One also has to question just how well this economy may or may not hold up once the Fed stops the printing presses. The bottom line is the uptrend remains intact and there are just as many reasons to own gold as ever!
Chart Source: QST
