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Gold got to the maximum of 6 months
Автор: Юрий Маевский: Ведущий аналитик отдела инвестиционных исследований
18 марта 2014
Gold got to the maximum of 6 months | MAYZUS INVESTMENT COMPANY


On Monday, gold got to $1392/troy oz., which is a maximum of last 6 months. Gold grew by 15%+ since the beginning of the year.

Price of gold started to correct after it reached a local maximum. At the moment, it is traded around $1360/troy oz. The loss is ~1%.

A few factors supported this “protective” asset.

First factor is an escalation of situation in Ukraine and a possibility of a military conflict between Kiev and Moscow.

US and European authorities are working on sanctions aimed to put pressure on Russia.

Barack Obama signed an executive order to freeze US-based property of certain Russian and Ukrainian officials.

Second factor that supports gold is instability of the debt market in China.

Second corporate default was recorded in China a few days ago. Building company Zhejiang Xingrun Real Estate Co announced corporate default after it couldn’t pay $566.6 million for the issued bonds.

Let us remind that on March 7, 2014, Chinese manufacturer of the solar batteries Shanghai Chaori Solar Energy Science & Technology Co. announced its default. Company was not able to pay $14.7 million interest for the bonds. It explained the issue with insufficient funds.

If situation on Chinese debt market gets worse, especially in the sector of high-risk bonds, it will cause flow of the assets to the “safe heavens”, which includes gold as well.

Gold looks locally overbought from the technical point of view. It is indicated by bearish divergence on daily and hourly charts. The nearest downwards target is $1340/troy oz.

If bears are able to breach it, then technical correction can reach $1310 and $1265.

%28Gold+chart%29

Click on the image to see full-size

Technical correction can also start after the announcement of the results of the Federal Reserve meeting (FOMC), where a decision about further cuts of QE3 program should be made.

Let us remind that stimulation cuts have started in December 2013, when monthly bonds buyouts were cut by $10 billion to $75 billion. January meeting approved QE3 cut by another $10 billion to $65 billion.

Situation on the futures market also indicates upcoming correction on the gold market.

According to the report by the U.S. Commodity Futures Trading Commission, namely COMMITMENTS OF TRADERS, hedgers continued to increase a number of short positions counting on the further decrease of gold’s quotations.

COT+chart

Click on the image to see full-size

Similar situation was noted in October 2013, when hedgers increased a number of their short positions. A significant correction took place right after that.

A significant increase of the long positions by large speculators (green on the chart) also indicates further conduction of the bearish scenario.

Gold will continue growing after the correction. Mid-term targets are located around $1440 and $1475/troy oz.

This information is an analytical review of Capital and FX markets. The material presented, and the information contained, is investment research and should in no way be considered as the provision of investment advice for the purposes of Investment Firms Law 144(I)/2007 of the Republic of Cyprus, or any other form of personal advice, which relates to certain types of transactions, with certain types of financial instruments.

Предупреждение о рисках: Торговля на финансовых рынках сопряжена с риском. Контракты на разницу ("CFDs") являются сложными финансовыми инструментами, используемыми для маржинальной торговли. Торговля CFD имеет высокий уровень риска, так как кредитное плечо может работать как в Вашу пользу, так и против Вас. Вследствие этого торговля CFD подходит не всем инвесторам из-за высокого риска потери инвестированного капитала. Вы не должны рисковать большими средствами, чем Вы готовы потерять. Перед началом торговли Вы должны убедиться, что Вы понимаете все риски и учитываете их в совокупности с уровнем Вашего опыта при постановке Ваших инвестиционных целей. Перейти к полному документу "Предупреждение о рисках".

Предупреждение о рисках: Торговля на Международном Валютном рынке форекс Форекс (Forex) и контрактами на разницу цен имеет значительные риски потери капитала.