Gold bounces on return of stock market volatility
James Chen January 14, 2016 1:24 AM
<p>The price of gold received a lift on Wednesday afternoon as volatility returned to European and US stock markets. Earlier this week, the yellow metal […]</p>
The price of gold received a lift on Wednesday afternoon as volatility returned to European and US stock markets. Earlier this week, the yellow metal had fallen from recent highs as stocks regained a measure of stability after global equity markets dropped precipitously during the first trading week of the year.
Traditionally, gold has been perceived as a safe haven asset that investors turn to during times of market turmoil. While this correlation has often failed to materialize in recent times, last week’s rise in gold appeared to be a direct result of large drops in global stocks.
Late last week, this rise in the price of gold reached a two-month high of $1112 just a few weeks after forming a bottoming pattern from December’s multi-year lows around the $1050 support level. The surge broke out above a downward sloping trend line that formed the upper border of the bottoming pattern, as well as the key 50-day moving average and the $1080 resistance level.
The stabilization of the equity markets in the first part of this week has subsequently brought the price of gold back down to the $1080 level, now as support, before Wednesday afternoon’s noted bounce.
With stock market volatility not likely over yet, gold may well have significant room to rise from its current position just off its long-term lows. Any sustained breakout above the $1100 level could see a partial recovery for the precious metal, with key upside resistance targets at $1140 followed by $1170.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.