Posted on July 25, 2014
Gold prices are moving moderately higher this morning as stocks are a bit on the weaker side. The gold bulls have not been able to take prices back above the psychologically important $1300 level as of yet, however. The gold market currently appears to be on its heels as stronger equities and a stronger dollar take their toll. The dollar index has been benefiting from not only safe-haven demand but also from stronger economic data. The gold market is right now trying to hold levels from its last trading range, and should it fail, it could potentially set the stage for another leg lower in gold prices.
As we have stated previously, it seems unlikely that gold and precious metals could fall significantly in light of the current geopolitical landscape. However, anything is possible when it comes to markets. Today being a Friday may give some clues as to the current state of investor risk appetite. Markets have held up very well given the amount of tensions around the globe, but will investors be confident taking home long positions over the weekend that could be potentially affected by headline risk? We shall see as the trading day wears on. Gold for right now appears to simply be seeing a corrective bounce after the selling yesterday. Although one may not be overly bullish here, one also may not want to take home a gold short position given the state of world affairs.
Of note in the gold market is the fact that the market has thus far held last year’s lows and is appearing to find support on larger dips. While this may not be of any comfort to short term traders of gold or market timers, it may provide some comfort to long term gold investors. If the market continues to hold these levels, then it simply means buyers are matching the efforts of sellers. The fact that gold has made higher lows since last year is also interesting.
The gold market certainly has not knocked it out of the park price-wise this year (not yet anyway), but it does seem to be bought up on good sized pullbacks. Perhaps this is an indication that the longer-term uptrend in gold is alive and well. In addition, it is entirely possible that at some point stocks and risk assets may start to falter. Should this prove to be the case, gold may stand to benefit once a large asset rotation begins.