Outlook looks drab for the Goldl, 2014 has not been a gold-en year
Gold has been swing around the $1200 level for a couple of days now, but with a little bearish bias. Usually neither the bulls, nor the bears have been in full control of things. Actually this report can be applied for the whole of 2014: even though gold has fluctuated quite a bit over the last 12 months, it is down only 3.5 per cent year to date now.
Gold has been held back this year by a couple of issues, most especially by the rallying stock markets and dollar. As we head towards the end of 2014, both of these assets are still moving higher, which makes it improbable we will watch a “Santa Rally” in bullion.
Moreover, the lack of inflation in the major markets has made the yellow metal a poor option for store of value. Gold has not been much of an option as a secure haven asset also, with investors wishing to hold the yen or the Swiss franc instead during times of market chaos. But with the Swiss National Bank just cutting interest rates to negative, this may have boosted the yellow metal’s appeal in this regard.
It is also worth pointing out the details that although all of the aforementioned headwinds, gold has dropped only quite so far this year. So, it might make a comeback beginning of the next year if there is a rapid need for safety, if, for instance the Greek circumstances comes back to the forefront of investors’ mentalities. That, or if physical demand picks up momentum, say, due to a quick increase in jewellery buys ahead of the Chinese New Year. But even then, the bulls would do very well to take gold’s price significantly higher.
The short term outlook still spikes to favor the bears. The latest rally was stopped a couple of weeks ago at just below $1240, a level which matches with a long-term bearish trend line. As then gold has been heading gradually lower and at the time of this writing it is coming under new pressure.
As things situation, a repeat of support at $1180 looks very much probable. Below this level is the 61.8% Fibonacci retracement of the latest upswing at $1172/3, which may also present some support. Now that it has broken below the $1200 mark, the possible rallies could be faded around this level, with additional resistance coming in around $1213.