Are the technicals and the fundamentals setting gold up for a grim picture?
The yellow metal has once again
broken below the $1,300 mark and its 50-day moving average. Now it’s
getting near its 200-day moving average, currently at $1,287.33 per
ounce.
This comes as the China Gold
Association reported that demand for gold in that country for the first
half of year dropped 19 percent compared with the same time in 2013.
Since last year, China is the largest retail buyer of gold in the world.
Ari Wald, head of technical
analysis at Oppenheimer & Co., is watching two technical levels
besides the 50-day and 200-day moving averages in gold. Though he has a
hunch it will move higher, he is still neutral on bullion as he thinks
trading in the metal will “remain sloppy.”
still neutral on bullion as he thinks trading in the metal will “remain sloppy.”
“We’re looking at $1,360
resistance on the upside and we’re looking at $1,260 support on the
downside,” Wald said. “Until then, I don’t think gold’s going to have a
lot of momentum to it. In fact we’ve been recommending it as the short
side of a long-short pair with the gold miners. We think gold mine
stocks do a lot better than gold metal here.”
Steve Cortes, founder of Veracruz TJM, said gold has been boring but is setting up for a move higher.
“Fundamentally, I think the
stage is actually finally set for a rally,” Cortes said. “We’re starting
to see some upticks in inflation after years of disinflationary
pressure.”
Cortes thinks moves up by
industrial metals like copper and aluminum are indicating higher prices
ahead. “That tells me that finally there’s some pricing power broadly in
the commodity world that should be bullish for gold,” he said. “I think
[the gold ETF] GLD can do better here and I like the miners as well.”
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