19 Jan 2015
Gold: Healthy correction or something else?
FXStreet (Bali) - Gold has performed a very impressive bull run worth over $110 from this year's low, catapulted from $1,168.00 to close last Friday just shy of $1,280.00.
One of the key drivers for Gold since the GFC - Globa Financial Crisis - has been the prospects of inflation in the US, with the spec community piling into the yellow metal short contracts in anticipation of low prices as the Fed's QE phase came to a conclusion. The strength in the USD was another secondary factor underpinning the decrease in Gold value. However, in a world faced with the risk of deflationary fears, it is quite surprising to see such a strong Gold demand this year. For now, the best course of action appears to be stick to technical until the global picture clears.
With volatility on the rise, and the lack of clarity to identify defined market themes, as the focus is continuously shifting - the SNB was the cherry of top of the cake -, it appears as though some aggressive speculative flows have come back into the - until recently depressed - Gold market seeking to create new trends. Whether or not the bull run has further legs to go, it remains to be see, as the relief rally might just be another healthy correction - as seen during Q1 2014 when Gold rallied over $200 - in what remains a multi-year bear rally. Bulls still have some work to be done to, breaks of $1,345 and $1,380 swing highs will be key, in order to feed on the optimism that a more meaningful change in dynamics/psychology to own gold is in the making.
One of the key drivers for Gold since the GFC - Globa Financial Crisis - has been the prospects of inflation in the US, with the spec community piling into the yellow metal short contracts in anticipation of low prices as the Fed's QE phase came to a conclusion. The strength in the USD was another secondary factor underpinning the decrease in Gold value. However, in a world faced with the risk of deflationary fears, it is quite surprising to see such a strong Gold demand this year. For now, the best course of action appears to be stick to technical until the global picture clears.
With volatility on the rise, and the lack of clarity to identify defined market themes, as the focus is continuously shifting - the SNB was the cherry of top of the cake -, it appears as though some aggressive speculative flows have come back into the - until recently depressed - Gold market seeking to create new trends. Whether or not the bull run has further legs to go, it remains to be see, as the relief rally might just be another healthy correction - as seen during Q1 2014 when Gold rallied over $200 - in what remains a multi-year bear rally. Bulls still have some work to be done to, breaks of $1,345 and $1,380 swing highs will be key, in order to feed on the optimism that a more meaningful change in dynamics/psychology to own gold is in the making.