Gold has been one of the most volatile commodities in the past few weeks owing to a range of factors. The global economy continues to be in a state of financial turmoil as the sovereign debt problems in Europe continue and the world’s biggest economy, the US, continues to show signs of slowdown. Gold is expected to continue trading in the higher range as fundamentals remain strong for the yellow metal.
Gold clocked a record of 1920$/oz in the international market recently but some easing has been seen from record levels. Yesterday, we saw a sharp climb again in gold prices after the IMF said that the global economy is in a “dangerous state”. Also, the unexpected downgrade of Italy’s credit rating helped gold rise further. The FOMC meets today to discuss the fiscal policy and a 3rd round of quantitative easing looks inevitable. Also, oil prices remain high raising concerns about inflation which is also supporting gold. Gold is often viewed as a hedge against inflation and currency debasement due to its intrinsic value and global acceptance.
Technically, gold has been moving in a triangular wedge formation which should most certainly breakout on the upside. As and when that happens, we should see the yellow metal once again reach its record highs. Gold is not expected to halt its supreme bull run anytime soon as the situation in Europe seems to have reached a stalemate with support being offered but no action being taken. As long as we don’t see a workable plan being implemented in Europe, default looks imminent and gold would continue to be the main beneficiary. Overall, gold is set to only climb higher from here on.
Complied by Mitesh Rasaikar, CEO (Marketing & Finance), Maya Iron Ores