CelticGold Market Report 12th October 2014
Gold finished the week at about $1222 capping off another week of high volatility. Since our last update Gold tested the double bottom reached in 2013 of $1180 and bounced above $1200 as physical buying came into the market.
The big story this past week was the selloff in global stocks. Most of Europe and the indices in the US were down this week on heavy selling. The German DAX is at a 1 year low as it fell below 9,000 after trading near 10,000 a few months ago.
Currencies, stocks and commodities have all been highly volatile as investors have been concerned about the health and growth prospects of the global economy. Despite lower commodity prices Gold and Silver have been able to move a bit higher as investors have moved some assets to safe havens.
From a technical perspective, according to Jim Wyckoff, the next key area of resistance for Gold is at $1234 and support comes in at $1200. As we mentioned in the last update forecasting the short term movements in the precious metals right now is challenging.
The major test going into next week for the metals will be too post stronger gains in an environment when the general trend for stocks and commodities is down. So we’ll see if Gold and Silver can attract additional safe haven demand as uncertainty looms for the broader stock indexes.
One of the more important charts that we saw recently came from an article written by Sovereign Man. The big problem with the global economy right now has to do with debt. In Europe, the US and Japan policy makers are attempting to stimulate their way to prosperity which will likely not work.
In the article below, the chart provides a good visual for where the price of Gold is headed. You can see the recent divergence in the chart where US debt has continued to rise while the Gold price has been falling.
The second chart shows the growth in the balance sheets of the Central Banks compared with the growth in the Gold supply. So despite the pullback in Gold over the last two years both charts paint a compelling picture for Gold in the long term.
Market Update for Silver
After falling below $17, Silver managed a nice bounce this week and closed on Friday at $17.37. According to Jim Wyckoff the next important area of resistance is at $17.72 with support coming in at $17.
As we mentioned in the Gold update, the challenge for Silver next week will be to stage a rally when the general trend for the stock and commodities markets are down. With the strong reversal that occurred on Wednesday of this past week traders may be less willing to take short positions in Gold and Silver.
Should investors continue to sell stocks, Gold and Silver are going to be a likely beneficiary to provide an element of safety to portfolio’s.
Another article that caught our attention this week highlighted the investment potential in the Silver market. Should Silver trade again at $50 an ounce it would be about a 194% gain from here. When compared to Gold returning again to it’s previous high the gain would be about 60%.
In our view it is best to have a strong physical position in both metals. However, as the numbers point out, the gains in Silver are higher simply because the metal has fallen further. So Silver is a great option right now, although the volatility will likely be off the charts.
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