There are
many opinions when it comes to the question whether gold is overvalued. Last three months gold
reached historical high and traded in consolidation leaving open question for
further rise.
From
fundamental point of view latest developments in global financial system set
bearish note for the precious metal. Weakness in Europe have risen dollar’s value as
investors stay away from euro denominated assets, thus lowering gold price.
Another threat for gold price is slowing growth in main gold markets China and
India which leads to low demand. Combination of above mentioned factors support current weakness of the commodity and short term outlook is negative.
Technically
last few months gold consolidates and trades in technical triangle. Exit from
this technical figure has two outcomes – braking up or downward. Usually the
following move coincides with the triangle height (in our case approximately $450).
After last three sessions the price broke down the triangle, which could
trigger steep correction to $1200 in next few months. Close under the strong
support on a daily chart - 200 MA (at $1618) is confirmation for prolonged bear
move. Next major support would be the 200 MA on a weekly chart - approximately $1200
suggesting extremely bearish move.
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| Possible gold correction to unfold |
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