Gold Likely to Consolidate as Markets Look on the Bright Side

Gold likely to consolidate as markets look on the bright side
For Julian Phillips, the factors that drove gold and silver higher have not changed and so one should ask the question: is the gold price now bouncing or consolidating?

Author: Julian Phillips
Posted: Thursday , 15 Mar 2012

JOHANNESBURG (Gold Forecaster) –

New York gave us the low at $1,642.80 before Asia stated the bounce taking it up to $1,648, while the euro continued to struggle at €1: $1.3046, while the dollar strengthened against most currencies. The morning Fix in London was set at $1,646.75 and in the euro at €1,262.26, while the euro stood at €1: 3046. Ahead of New York’s opening it stood at $1,647 and in the euro €1,262.65 while the euro was at €1: $1.3045.

Silver stood a $1 lower at $32.18 in London. Ahead of New York’s opening it stood at $32.32.

Gold (very short-term)

Gold should consolidate at these lower levels, in New York today.

Silver (very short-term)

Silver should consolidate at these lower levels, in New York today.

Price Drivers

Today is the ides of March, the day Julius Caesar was assassinated. Shakespeare warned in the play about that day, “beware the ides of March!”

The markets have decided that it is time to take a positive view of the recovery as the Fed implied that more quantitative easing was not necessary at this stage. Investors should be cautious, asking themselves, is there really such a cause for optimism. We glance back to the Greek drama and remember that markets jumped when they believed that a banking crisis was not going to happen. That allowed investors to broaden their choices in the face of lower risks to themselves [not the market per se] and they ventured into the more likely investments to blossom in a better environment. These included precious metals.

Yesterday we pointed out that gold did best in an economic ‘growth’ environment. So beware of market exuberance! The factors that drove gold and silver higher have not changed. But before you act, ask yourself, is the gold price now bouncing or consolidating?

The dollar rose against most currencies reflecting the positive tone, while its trade deficit is climbing yet again. When one sees the dollar rise against other currencies the wrong word is used, saying the dollar is strong. Not so! The dollar is stronger than other currencies, but not strong. Strength implies that the fundamentals for the dollar have improved. To make the most of these opportunities, investors should take a long look at the deeper picture of the fundamentals before rushing in, where angels fear to tread. We have just produced an article called, “What’s driving the gold & silver prices”, which gives a fuller picture than just the day’s moves.

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