Will GLD Resume Its Decline?
Gold Spot $/oz. and 200 Day Moving Average – August 2009 to Today – (Bloomberg)
Gold rose $4.80 or 0.3% in New York this week and closed at $1,620.70/oz. – its highest level in three months (since June 19).
Gold continues to be supported by the real risk of European Monetary Union break up and further weakness in the euro, dollar and other currencies. Gold continues to consolidate below its 200 day moving average at $1,644/oz. The $1,640 an ounce mark for gold was universally considered to be the key price level for the metal to entice bullish traders back into the market, analysts at Barclays Capital recently noting that a break above this level is “required to confirm potential upside toward initial targets near $1700 and $1800″.
Technically, gold needs to close above the 200 DMA. Should this happen we could see quite significant short covering and more speculative elements on the Comex may sense blood and come in on the long side in a more aggressive manner thereby propelling gold well above its recent trading range.
Gold analyst Joe Foster is the investment team leader for Van Eck’s flagship gold fund, the Van Eck International Investors Gold Fund.
He asserts, “I think gold will end up on the year. In fact, I think it will be up significantly from where it is right now. This gold market has been consolidating since September of last year. This consolidation is almost a year old, and it’s forming a base from which I see it trending higher. We’re still in a deflationary environment and we’re going to see central banks continue to try to stimulate the economy.”
“That’s going to drive gold in the second half. In addition to that, we have the election coming up and the fiscal cliff and all these sorts of risks going forward. We know about all the problems in Europe. I think at some point following this long consolidation, we’ll see a nice trend higher in the second half.”
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