“Global optimism” Prevents Gold from Rising

Gold is making another attempt to rise using the USD short-term decline as a catalyst. However, the mid-term channel borders look quite stable and the precious metal is very unlikely to break them unless there is a really good reason for this. At the beginning of another November week, the troy ounce of Gold costs $1273, which is right in the middle of the current range.

Investors have alternatives – this is what is still counting against Gold. Rally on global capital markets doesn’t die down and allows market players to make money on traditional volatile assets, such as stocks and bonds. In recent months, the main indices updated their all-time highs over and over again. Among them are Dow Jones, S&P, and Nikkei 225. However, some certain “bursts” of global geopolitical tensions aren’t strong enough to impress investors and provide support to Gold. Right now, investors don’t consider confrontation between the USA and North Korea, which has declined recently, and “political fire” in the Middle East as a serious threat to the global optimism. This is why the demand for Gold as a tool for hedging risks is rather low.

Apart from market factors, there are other reasons not to buy Gold. Physical demand for Gold has decreased in India due to the introduction of the commodity tax, which reduced buying activity. China neutralizes this factor to a certain degree, but prices are still under pressure. World’s largest Central Banks continue buying Gold to prevent prices from falling lower, but such support isn’t enough to keep them in balance.

The current situation won’t change as long as the world is “full of optimism” and believes that this bullish rally may last long.

The current mid-term trend can be described as a flat. However, considering that the gold price broke the resistance line of the descending channel, we may expect a tendency reverse. In this case, in the nearest future, the price is expected to grow towards the current resistance level and 1311.00. If this level is broken, the uptrend will continue. However, if the instrument started a sideways correction, movement between support and resistance level might take a lot of time. On top of that, we shouldn’t exclude a possibility that the price may break the support line at 1266.00 and fall towards this year’s low.

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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.