Gold Monthly Review – JUNE 2009
Posted June 13, 2009on:
Gold found support at $865/oz and prices have since embarked on another up leg that looks set to challenge the highs above $1,000/oz.
· Holdings in the Gold ETFs have started to pick-up again and funds have been even stronger buyers.
· Fresh dollar weakness has been an important driver in the market, but there are also concerns that economic recovery and quantitative easing could bring forward inflation.
· With other asset classes also rising strongly there is growing risk of a setback, that could funnel more money into Gold.
· The move above $930/oz got us bullish again and we are now looking for new highs.
Gold starts its second up leg with prices rechallenging resistance above $990/oz.
At the start of May, Gold was consolidating off the April lows at $865/oz and the jury was out as to whether prices would dip further, or resume their uptrend. Our stance was to wait for the market to show its hand, with the recommendation to join the rally on a move up through $930/oz, which we saw on 13th May – by early June prices had reached $990/oz. Numerous factors are combining to boost the Gold price and there seems a high chance now that this up leg will head on into new high ground above $1,032.50/oz. There are of course factors that could trigger profit taking, but overall the big picture for Gold has started to look bullish again and any dips are likely to be viewed as further buying opportunities.
Technical – Gold challenges key levels
Having found a base around $865/oz Gold prices started to bounce and the rally appears to be turning into another up leg. The first up leg ran from around $700/oz in November to the $1,006/oz peak in February, it consolidated until mid-April, before breaking above the down trend line in early May at around $905/oz. If the second up leg runs a similar distance to the first up leg then we could be looking for a move up towards $1,200/oz. Near term expect resistance around the $1,000/oz level, but once prices surpass $1006/oz a run up to the highs could follow quickly. As we saw during the first up leg, large pull backs can be seen along the way; last November/December Gold saw a pull back of $90/oz and in January there was an $86/oz drop, so volatile trading is likely, especially as we approach the highs. With trend line support around $950/oz and $910/oz and the 100 day moving average around $915/oz, pull backs towards these levels can not be ruled out, but such moves are likely to attract buying.
Summary – Gold prices have started to head higher and look set to challenge supply around the highs.
The markets are worried about dollar weakness and the level of US debt and as a result there are ongoing concerns about the financial crisis that could intensify again. In addition, with equities and industrial commodities extending gains they are becoming vulnerable to setbacks. Any such set back could see more money move into Gold as investors focus on wealth preservation. The rally has already covered a lot of ground and investors and funds have been active, so the combination of looming resistance above $1,000/oz and general nervousness, may well trigger bouts of profit-taking. Overall we expect dips to attract buying and for Gold prices to be trading at new record levels before long.