Is Gold Range Bound Waiting to Break Out?

April 16, 2009 | By | Reply More

Spot gold continues to stay in the $880 to $900 price range as indecision reigns in stock markets.

Investors are unable to decide whether stock markets are in a bear market rally or that the ‘green shoots of growth’ that politicians are fond of telling us has become a reality.

The question we wish we could confidently answer is whether gold is range bound just waiting to break out?

India has come back into the market after three months of next to zero imports, an unusual occurrence for the world’s largest gold consumer, as the end of April marks a major festival for gold buying.

Some reports put this demand as weak coupled with gold ETFs not topping up their holdings.

With investors risk appetite reawakening to the prospect of rising stock markets, gold and silver have suffered, as money has been kept available if and when the signs become clearer that equities are in a sustained recovery.

Technically gold looks as if it is still in an upward trend over the longer term, while at the same time and despite some bearish (aka deflation) comment, support at the current level seems firm.

The harsh reality is that the economic news coming out of the USA continues to be grim, banks are still going bust, unemployment is still rising and consumer confidence remains low.

Nor is it any better in Europe as Germany slips from third largest world economy to be overtaken by China.

The spectre of the trillions of new money thrown into the economies of much of the world with every prospect of more to come will eventually have its eroding effect on the money in your pocket.

History shows us that a rise in equities will in all likelihood keep pace with inflation.

Perhaps that is already being factored in by far sighted and optimistic investors.

Whether the current rise in equities is sustained or the market is just bracing itself for a further dash downhill, investing in gold and silver remains, in our opinion, the safest option for riding out the continuing storm of depression and eventual high inflation.

But then what do we know? Only that the markets will continue, as they always have done, to surprise, seeming to defy logic to catch out even the most cautious of investors.

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