Gold Technical Analysis
The market tried to rally a little during the trading session, but then turned around to show signs of weakness. This is a market that will be punished by the overall interest rate moves, and the higher the rates, the worse non-yielding assets like gold do.
The area just below current trading, from $4,200 down to the $4,000 level, has been an area of demand in the past and so far has helped out with support. All things being equal, this is a market that continues to see a lot of questions when it comes to the overall directionality of the market.
Interest Rates and the Middle East
That being said, interest rates are moving on noise coming out of the Middle East and concerns about energy inflation. I think the other big situation here will be interest rates. We see interest rates fall, and then generally speaking, that does help gold. That has been the situation here as of late, and continues to be the main mover of markets.
It is not really a situation where it has anything to do with much beyond that, other than a few examples out there that are a little bit different, such as France, which is more of a fiscal problem. This is a completely different situation than most countries.
As long as rates remain high, it does work against non-yielding assets such as gold, and therefore it looks like we are essentially stuck at the moment. We do have a massive amount of demand underneath, though, and that should continue to keep this market somewhat buoyant.
If you’d like to know more about how to trade gold and silver, please visit our educational area.
