Gold Technical Analysis
The gold market continues to hang on to a significant uptrend line that goes back to the beginning of the year. Therefore, this is still a very technically driven chart from my standpoint, and now we have to determine whether or not the buyers can continue to support this market.
There is an area of demand that extends down to the $4,000 level as well, so that comes into the picture. Ultimately, interest rates in America continue to cause a major problem, and the historical correlation is that when interest rates are higher, gold drops, and when interest rates are lower, gold rises. Typically, it is not every day, and it is not every tick, but as long as we have plenty of concerns about these elevated rates in America that seemingly have no interest in dropping anytime soon, this remains an issue. This is based on energy inflation, so as oil rises, that tends to have a pretty steady correlation with interest rates in the United States, and as they rise, it works against gold.
It’s Not Just Oil Pressures
Now, having said that, there are major concerns out there from central banks and traders about the profligate spending of various governments around the world, and we are seeing higher rates everywhere. It is not just the U.S. Traders typically like buying paper when there is a guaranteed return. It really tears apart the whole idea of non-yielding assets being a place to put money, like gold, silver, etc.
Nonetheless, this is a market that I think is in an area where we are starting to look for some reason to rally. The question is, will we get that reason, which would either be some explosion in safe-haven demand or interest rates dropping? Until we get something to get this market moving, it is going to continue to just bumble around.
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