December 15th, 2015

The price of gold is up 30% since March, is it still a buy?

By: Invezz
The price of gold is up 30% since March, is it still a buy?

The price of gold has extended its correction from the record highs above $2 070, registered in the first week of August. Despite this, there is no reason to panic and as long the price of gold is above $1 800 this precious metal is in the “buy” zone.

Fundamental analysis: The price is supported by uncertainty over the global economic future

Gold is considered a safe-haven asset and the price of gold has advanced in the wake of the coronavirus crisis as investors look for safer places to invest their money. Popular sentiment around this precious metal has grown greedy and euphoric and according to some analysts, gold is overbought currently.

The price of gold has become disconnected from fundamentals, and the flow of funds into gold “shows how much speculation and enthusiasm is around this precious metal. Despite this, the scenario for the price of gold could be even better as the “dovish” Fed decision continued to pressure the US dollar.

Former Goldman Sachs CEO Lloyd Blankfein also said that the US dollar will lose its value further and the price of gold will strengthen even more. This precious metal is also supported by uncertainty over the global economic future and safe-haven assets typically perform well during downturns and financial crises.

The price of gold may be ready to advance higher as Federal Reserve announced that will keep interest rates lower for longer to support the economic recovery.

Technical analysis: The price of gold is in the “buy” zone

The price of gold has continued to trade in an uptrend and investors trading gold are expected to be more active in the next several weeks.

Data source: tradingview.com

When we take a look at the chart above ( one year period), we can see that the price of this precious metal has advanced from $1 445 to $2 075 and after that started to fall. As long the price is above this trend line this precious metal is in the “buy” zone and there is no indication of the trend reversal.

If the price falls on the trend line and if we get a “bullish” confirmation candle it would be a very good entry point for short-term traders who are trading with “stop-loss” and “take profit” orders. The trend line represents a very strong support level, if the price breaks this trend line it would be a very strong “sell” signal and we have an open way to $1 900 ( this is also support level).

If the price jumps above $2 000 (short term resistance level) that would be a confirmation of the “bullish” trend and open way to $2 050 or even $2 100.

Summary

The price of gold is overbought currently but weakness in the dollar and low U.S. Treasury yields could help this precious metal to advance even more. The price of gold has extended its correction from the record highs above $2 070, registered in the first week of August. Despite this, there is no reason to panic and as long the price of gold is above $1 800 this precious metal is in the “buy” zone.

The post The price of gold is up 30% since March, is it still a buy? appeared first on Invezz.

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