-- Posted Thursday, 5 April 2007 | Digg This Article
| Source: GoldSeek.com
Many market commentators were caught off-guard by the breakout yesterday, because they looked only at the superficial, but dramatic news stories, usually given the responsibility for making the gold price move. But several types of forces drive the gold price, for instance: -
- Dealers set their prices according to the ‘mood’ of the market, which can be temporarily affected by a news story.
- Funds with a combination of technical [chart] support & resistance levels together with the ‘mood’ of the market, try to ‘assist’ the gold price up or down, by their buying and selling.
- As both are very short-term in their outlook, they will respond to the direction given by the longer-term picture, such as physical and investment buying.
The overall Iran situation as well as the story of the captured British soldiers, are not, in themselves, factors prompting the longer-term buyers of gold to go into the market, but it is one of those items, which color the very short-term. The fact that gold rose when the news items and the oil price pointed gold down shows the underlying combination of strong fundamentals in the market.
At times the market will appear to defy news as we saw yesterday as gold rose, but it is the underlying tide of the market that is taking control of the individual ‘waves’ of the market.
The current rise in the gold price is overdue, but overhead resistance got in the way. It is now out of the way so the jump is happening now. This is caused not solely by the situation in Iran but a combination of longer-term factors: -
q The $ is starting to slip again at $1.336: €, which to us indicates the next move is lower.
q The oil price is holding above $60 and while it has slipped, does not appear likely to drop below $60 soon.
q Looking forward the $ points lower, oil points higher, but with the advent of a second Indian gold Exchange Traded Fund and opening demand of around 28 tonnes in that one alone, and the streetTracks gold E.T.F. still increasing its demand steadily, investment demand for gold is strong and steady.
q On the ‘big gold picture’ the fundamentals are strong as duties begin to hit Chinese goods, the troubled Middle East shows no signs of improving and the ‘ripple effect’ of a weakening $ all together promise a far greater degree of global uncertainty, both near and far term.
q Physical demand sits strong just under $660 and with this level holding for a short while now. Indian demand is convinced that gold is going higher and will buy at levels that have convinced the market they will hold, which now includes $660.
q The funds have shot their bolt on the downward path and should prefer the long side soon.
What we are seeing here in the market move is a breakout from the overhead resistance in the mid $665 area. This should have happened as oil rose initially and the $ began to fall through $1.33, but overhead resistance needed to be defeated. Now it has been, so yesterday was a session of catch-up.
-- Posted Thursday, 5 April 2007 | Digg This Article
