Gold Price – To Buy Or Not To Buy?

By Pete Southern in Gold and Oil News | October 7, 2014 17:44 | Tags: ,

As things stand, Gold prices have bounced (since Monday) from the lows of the last two years. The question remains, to buy or not to buy? With the US Dollar on a rampage, it’s easy to find reasons to be uncertain on Gold, however, does this bounce show us where support in the price remains?

gold daily chart

As you see above in the chart, the lows here have been tested (now) three times since mid 2013. Often a few good tests of a support area are needed to see if traders see value at that level. As it happens these are not the only times the level has been tested. Take a look below at the weekly chart for Gold, and specifically the area in late 2009, when the price broke through this level of resistance, and then retested it from above, before continuing the trend up to the highs.

weekly chart

In my opinion the recent falls in Gold prices to these levels are completely down to the movements of the US Dollar. If you haven’t been following, the Dollar is on a roll at the moment. Since August it has been pushing higher, and can you guess what? It is now right up there, near the levels it was at during the bullish break-through in 2009.

dollar index

So you say Gold is about to go higher? Maybe, maybe not. If it is to go higher, the stock market needs to react to the surge in US Dollars. Right now it’s not. But any hint of movements from the Fed on interest rate hikes or loosening of monetary policies, may see that change, and change quickly.

Any sharp shock to the markets whilst the US Dollar is strong will most likely see a sustained sell off in stocks. That money will usually flow right into Gold, in huge volume.

So, to buy or not to buy?

I’d say wait, but keep a very close eye on the way things pan out over the coming month in Gold.

Pete Southern About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.

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