Market Report 10th August 2020
Gold at record highs is the main focus of today’s market report. Last week Gold broke through the US$2000 barrier reaching a high of US$2075.76 before falling back to US$2030.14. This represents an overall gain for the week of 2.78%
Don’t panic! Thinking you’ve missed out on the opportunity to profit from Gold. This weeks prices were based on speculation rather than economic fundamentals so be ready for a drop in price and the opportunities that will arise.
Technical Analyst, Karen Jones, from Commerzbank said “The never-before-reached US$2000/oz is a major psychological resistance level, with gold’s 49-year trend channel resting just below it at US$1983. Only an end-of-month or, better yet, end-of-quarter close above these levels will signal a breakout in the price of gold”.
In other words, there is no support at present for the currently high prices.
Charting is a popular way to analyse bullion movement and predict where you expect the prices to go. Using a 20-day moving average and RSI indicator support for Gold is coming in at US$1875 indicating the correction on the current speculative prices could drop quite substantially.
“The 20-week moving average is currently at US$1755” says Tom Pelc an independent technical analyst.
The general consensus by analysts is the price of bullion will fall back quite sharply. However, when it goes back up, based on fundamentals in the economy rather than speculation the feeling is that gold could go up far more spectacularly offering excellent investment opportunities.
Pelc continued “if resistance is broken, Fibonacci extensions offer short-term targets. These are based on the idea that a rally will extend in predictable proportions extrapolated from a previous rally. One is at US$2067 another comes in at US$2286. Lucas ratos – another tool using a sequence of numbers similar to Fibonacci’s- suggests gold could rise to US$3598 an ounce in 4-5 years.”
If these experts are anywhere near right on their projections then there will be plenty of opportunities to make a decent profit from gold bullion in the near future.
Silver reached a high of US$29.88 before dropping back to US$28.33. This gave an overall increase for the week of 16.07%. Silver hit an all time high of US$49.45 on 18th January 1980 and then in the 2008-2014 Great Recession went up to US$42 to ounce. There is still a lot of opportunities available with this currently undervalued commodity.
It’s worth noting that despite the high prices for gold, traditionally, silver outperforms gold. Historical charts show it initially lags behind gold and when it moves it’s 3 times more than gold in either an upward or downward direction. The latest charts again show silver outperforming gold.
Put a plan together to regularly invest in small quantities and you will do well in the coming years. Using a PCA strategy will even out the costs and when the economical fundamentals support the price going up you will be in the best possible situation to reap the rewards.
ETC’s broke all records last week as more funds were transferred into them during the “gold rush”. It is estimated that ETC’s now have more gold reserves than the Bank of Japan which is a major holder of the commodity.
Where has the money been flowing
Indications to date, are that with the economic impact countries are seeing investment money go into different markets. In the UK, property prices have gone up in July indicating more investment into those markets while in the US and in parts of Europe the Share Markets have rebounded. IMF have warned that economies are unlikely to get back to pre-covid-19 until 2022. Undoubtedly, money will flow in and out of markets making it extremely volatile in the coming months.