Dynamic price increases on the gold market

Anna Lachowiecka from X-Trade Brokers, XTB at 11/23/09

The price of gold continues to increase and now stands at 1165 USD per ounce. This is due to the weakening dollar and increased interest from investors in the gold market. In the third quarter demand for gold increased by 15% compared to the previous quarter, however, comparing to the same quarter of last year, when gold reached record highs because of the deepening global crisis, it is a decrease of 34%. Comparing the average demand for gold in the last 5 years, the demand decline is only 4%. Conclusions of the report for the third quarter are positive. The report shows an increased interest in gold in recent times from the demand side.

From the technical analysis standpoint we are in a long-term, dynamic upward trend. The week started with a increasing gap, which first quote at 1150.80 USD will provide support for the potential correction movement. The next support level is at 1070.40 USD, arising from the local peak of the 14th of October. The goal of the market is 1230 USD, where the current increasing wave will equal the previous one.

The outlook for gold is positive, since increasing demand should be at least maintained. This is due to the still existing uncertainties on capital markets. Gold is treated as a diversifying instrument, as well as a protection from the risk of inflation in the United States. In addition, it is expected that the trend among central banks to expand gold reserves will continue. That will certainly increase global demand. The price of gold will also react to the situation on the currencies market and the probability of further weakening of the U.S dollar will contribute to higher growth.