Jul 15, 2011

Gold Tech View

Gold proved to be best performing asset in recent turbulent days. As suggested in previous post (Silent gold correction) it broke its resistance level $1560 reaching new historical high. Now many investors are curious is there any more room to grow. Considering current situation of growing concern over credit credibility of most developed countries there is strong support for the metal. All growing risks and uncertainty in the system is bullish sign for the precious commodity. However every experienced investor knows that direction of every asset is not only north. Risks for gold correction are real, although do not seem to appear in short term. Debt burden is long term problem and governments around the world started realizing that now take necessary steps to limit it. Steps in this battle are US debt ceilings debates and efforts of several European countries to cut costs. It takes time to turn back to normal fiscal policy but when those measures give first results gold is expected to step back as it is considered safe heaven in raised market volatility. In short run we could expect test of the breaking level around 1560 after positive move is restored. This pull back could be short lived because rising concerns over US debt rating cut (now 50% probability) will depreciate dollar. Cheap dollar will inflate the gold as it is often perceived substitute.
Gold Brake Consolidation Triangle
Chart source: stockcharts.com, Chart analysis: investink.net

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