Gold is under pressure again. It’s down around $40 an ounce over the past week to $1,259.
Theories on why this might be abound: from the popular victory of Petro Poroshenko in Ukraine, to the most simple of explanations being that gold fell because it could go up.
Jordan Eliseo chief economist at ABC Bullion told Business Insider the breakout from gold’s trading range “had to happen eventually”.
He noted that the path of least resistance (something all traders are looking for a prices tend to follow) was down because of a combination of factors.
A fall in demand from China (note total demand is still incredibly strong there) maybe have been a factor, and short term more weakness is to be expected, especially if stocks keep clocking up new all time highs.
Longer term though. Eliseo is more sanguine, saying the gold fundamentals are strengthening, “especially with the new Central Bank Gold Agreement stressing the minimal desire of European governments to trim gold holdings. Alongside continued buying by Emerging Market Central Banks, that should be a positive for the market.
If you look at the technicals though, it seems this break could see a move back down toward the double bottom at $1,187 which marked this and last year’s lows.
Whether that holds or breaks will determine the outlook for gold in the months ahead.
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