Saturday, December 17, 2011

Where is the Turning Point in Gold Prices


Gold price in free fall since last Monday due to a massive sell-off. The series of negative sentiment appeared simultaneously so that recovery is inhibited.

Comex Gold for February delivery has down and closed below the psychological US$ 1600 per ounce. Such poor performance looked one last time in September. The condition is more severe on Friday (Dec 16), gold opened at the level of $ 1,580, or the lowest opening price since July.

Current performance contrasts sharply with the price movement of a few months ago, which to fly to the range of US$ 1920. Gold did not longer seen as a safe haven, gold as a commodity is now precisely swept by the movement of risky instruments.

In the past precious metal seen as a means of hedging, its role is now really have taken over the (US) dollar. When European economic risk peaked, gold following the euro's performance. The weakening of the euro is directly proportional to the strengthening of the dollar so that commodities which are traded using US$ be more expensive. On that basis logic, investors are reluctant to buy gold, so even with other strategic commodities, like oil.

The condition aggravated by year-end policy of financial investment institutions. Typically, hedge funds and fund managers liquidate its gold assets positions to cover losses on other assets, like stocks and secondary risky assets. Morally, no institution is willing to show off losses to clients. All would like to show good performance, it is better if get profit in large quantities.



Last September, when prices fell sharply, the majority of analysts saw as a support level of US$ 1600 is ideal (see graph). If the characteristic correction in this month combined with history in last September, then at current levels should be buying re-emerged in large numbers.

That way gold can be consolidated, such as when it reaches a low level 3 months ago. But now the situation is a mess. Demand is still shy, even when the price has reached US $ 1,564 per ounce. Almost certainly a lot of capital account in the Comex have preparing touched its stop losses.

Now the question is, how much gold on support can re-find its momentum? With a wild movement as it is now, not many investors are willing to risk his position on the instrument of gold. Moreover, there is no sentiment planned that will appear in a few weeks remaining in the year 2011.

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