With a nearly 3% drop starting Tuesday, gold prices made their long anticipated move downwards – and that should keep the physical market running. So far there is no indication of a bounce back, although the $1,250 per ounce mark may prove to be a frail near term support level.
Gold prices tested the support in mid-session Thursday, but bounced back and closed the day at $1,255.90 per ounce. However, it is obvious that buyers do expect to buy gold much cheaper than that. We have to go back to the end of January and the first days of February to find gold “flirting” with these prices. As it turns out, gold is less than $40 away from losing all the gains it made in 2014.
Most analysts would agree these gains were prompted by last December’s price double bounce on the $1,200 an ounce resistance, the weakness of the dollar, and the Ukraine crisis. Before we look into any “conspiracy” theories, let’s first take a look at some facts.
Market analysis justifies 2014 gold price movement
So far this year, investors using technical analysis have been able to predict or at least explain every single move of the price chart. It was as clear as daylight that gold prices had nowhere to go but upwards. The Ukraine-Crimea crisis along with worries for a US debt default, reasonably lead to a mini rally which peaked with fears of a military conflict and a world economic crisis.
Crimea’s peaceful annexation following the referendum triggered a strong correction, costing gold a 50% loss of its gains, not changing however the upward trend. Continued turmoil in Ukraine and the US economy gave prices another push in April, but the plunge on the 14th of that month left prices withering around the $1,300 per ounce for six weeks, the congestion leavingno clue for the market’s trend and leading to Tuesday’s outburst.
Negative reaction gives no clue for gold price trend
Last Tuesday’s negative price reaction coincided with the election of representatives to the EU Parliament held in 28 European member countries. Just by glancing at the results, you can easily see why gold prices dropped when they were announced.
To begin with, it is not true that Western investors do not find gold attractive. Investing in gold bullion is innate to western tradition for centuries, and the swelling of middle class incomes in the last two decades has brought millions of new private investors to the gold market.
EU economic policy, however, has brought middle classes in the southern European countries’ close to extinction. Millions of people who did not entrust gold to preserve their savings and secure their financial future are now struggling to make ends meet. On the other hand, a number of Greek investors purchased a record amount of gold Sovereigns in 2012 and 2013, with Greece close to default.
This week has given us no sign concerning the market’s direction in the following weeks. Nevertheless, the market is finally moving, so stay connected with the coininvest.com site for a profitable investment in gold bullion bars and coins.