18 January 2015

CelticGold Market Report 18th January 2015

Gold Technical Chart - 1 Year

Gold increased over 4% since Monday to close Friday at about $1277. This past week Gold delivered on its reputation as a safe haven asset. Now the big test will be to break out above $1300.

Oil fell briefly below $45/barrel this week and many commodity markets continue to trade lower. Copper has been the latest victim of the deflationary forces hitting many regions of the global economy. Yet Gold and Silver have traded much higher, which is a positive sign.

Gold is also starting the year by de-coupling from the US Dollar. Many traders and analysts have predicted lower Gold prices in 2015 because of a stronger US Dollar. However, so far Gold is rising despite a stronger Dollar. This move is showing the strong safe haven status that Gold has. With market volatility likely to continue, Gold should gradually move higher. 

The Swiss Shockwave

As many of you know, the big news this week came on Thursday when the Swiss National Bank said it would no longer support the 1.20 Euro/Franc currency peg. This caught the market by surprise and sent the Franc soaring in foreign exchange markets.

The Swiss Bank likely realized that it would have to print to much money to continue to support the currency peg. So the Swiss become the first Central Bank to withdrawal from the currency war and allow the Franc to appreciate.

The decision by the SNB caught most investors and traders off-guard. In the next few weeks news stories will start to surface about the fallout from the Swiss decision, which could be significant. The one positive for Gold investors is that traders and investors will have reservations about shorting Gold in this environment. 

Attention Shifts to the European Central Bank

Many have suggested that the Swiss National Bank abandoned the currency peg due to expectations that the European Central Bank will begin a quantitative easing program soon. A new QE program by the ECB would require the Swiss bank to print more money to defend the peg.

The European Central Bank is meeting next week and according to an article on Kitco, markets have priced in a 75% chance that ECB president Mario Draghi will announce a program to purchase sovereign bonds. (Source: Kitco 01/16/2015) The focus will now shift from the Swiss decision to Europe and the ECB. 

The momentum is with Gold right now, especially if your holding Gold in Euros.

Market Update for Silver

Silver Technical Chart - 1 Year

In percentage terms Silver’s 7% plus rise this week is even more impressive than Gold’s increase. The surge in the Silver price comes despite a collapsing copper market this week. Many have speculated about how Silver would perform in a deflationary environment. While a lot can still happen the current rally in Silver is a good sign.

As long as Gold continues to rise, Silver should follow suit. Prices have moved very quickly in a short period of time, so a short term pull back is a possibility here. However, the technical picture for Silver has improved dramatically, and like Gold, has strong momentum.

With the ECB meeting next week and markets still roiling from the Swiss decision, it could be a wild ride over the next couple of weeks. Should be interesting to watch…

Author: celticgold.eu

Older Swiss Abandons Currency Peg Newer Swiss Aftershocks