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Corrective movement on the gold market

Anna Lachowiecka from X-Trade Brokers, XTB at 12/07/09


After the surprisingly good macro data from the U.S. labor market the american currency appreciated, which in turn caused gold prices to fall. Currently, one ounce costs $1146. This fierce reaction on the currency markets comes from the speculation that improving economy conditions, especially on the important labor market, can lead to changes in FED’s monetary policy, which can slowly begin to rise interest rates. Expectations for higher interest rates in the U.S will encourage the dollar to appreciate and can further lead to a fall in interest for commodities markets.

From the technical analysis point of view, gold prices stay in an upward trend, which next wave ended at the $1226 level. The present corrective movement can reach $1103 where we have the upward trend line. The next support is at $1070, where we have the peak from October 14th. Breaking this level will give us a signal that a deeper price drop is possible. The resistance is still at $1230.

The situation on gold market will depend mostly on the situation on the currency market. The strong dollar appreciation can be only temporary, and lead to further, stronger attacks for new yearly highs. If the EURUSD returns to an upward trend it will create a great moment to buy commodities, which prices has fallen recently. If, on the other hand, investors’ sentiment changed it will be a signal to verify the gold market analysis.

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