Gold is on a tear since I warned that negative price action was waning on January 6 (here). Gold has been able to overtake the $1,240 per toz. hump and chug along on global growth concerns. The IMF, just among the bunch, lowered the outlook for growth prospects; and the second largest economy – China – is pulling back, down to the slowest pace of growth since 1990. Gold remains a safe haven.
Traders are shocked the yellow metal has been able to rally like it has. They often point to technicals or the US dollar , but there is one thing that trumps all of that – trader pyschology. There is a psychological connection to gold . It’s what the financial savvy want during times of uncertainty and what traders want to hedge their risk exposure.
Gold is “overbought” on the , but the weekly chart still offers room to move with the weekly only at 60. The is, too, supporting further moves following a slight pullback. Price action since the beginning of the year has been able to break each key . Once it has closed above resistance, traders have testing the former resistance, now support, and gold has been able to bounce higher. $1,273 had been tested several times yesterday before moving through $1,290. I expect a test of minor support at $1,280, while $1,295 will be the next resistance hurdle.
If gold can close above $1,295 and handles the $1,300 psychological resistance, look for the “premier currency” to trade to $1,315 per toz. However, gold will likely see $1,280 (potentially revisit $1,273) on profit taking.
Gold is likely front running the potential for quantitative easing from the European (ECB), but analysts are suspect when it comes to the size and structure of stimulus. The decision will be announced in two days by the ECB.
My call on Newmont Mining ( NEM ) has also produced gains of 13 percent (currently).
I'm not against growth. Hell, if China grows - awesome! If the US grows - ever better. But I won't assume that is de facto because oil is down.
Chinese industrial production is literally half of what it was in 2011. Manufacturing is stagnating, according to PMI data wavering from 51/52 and high 40s. Fixed asset investment is also a fraction of what it was since 2011.