Gold rally to continue?

It has been a stellar year so far for gold as investors having been bidding up yellow metal’s price aggressively.  Gold recently traded above $1,200 a troy ounce, after hitting its highest level in a year earlier in February. So far in 2016, the metal has rallied some 16%, making it one of the year’s best-performing assets.

Worries about possible US recession and implosion of China’s economy is the main reason why safety seeking investors collectively want gold. At the same time, investors now believe that there’s virtually no chance the Federal Reserve will raise interest rates again in March, and many even doubt that the central bank will do so by year end. Continued low rates would be good for gold, which pays investors nothing and must compete with yield-bearing investments when borrowing costs rise.

Will the rally last?

Bearish view:

  1.  Worries about global recession and China’s economic turmoil are way overdone, any ease of the fear will see money flow out of gold since it has run up steeply.
  2. the US FED is still watching inflation closely. it will act quickly to raise interest rate.  Core consumer prices are up 2.2% over the past 12 months, the biggest increase since the summer of 2012. Jim Glassman, economist at J.P. Morgan Chase, said the CPI data will gain much of  Yellen’s attention when it comes to rate hikes. “Most of us have ruled out the Fed until June. But that’s because the stock market is down 10%,” he said. “The market can shift on you.”

My predication:

Don’t chase gold from above $1250. Gold price may drift lower towards $1150 in near term. it will find its footing around $1100.  Load up the shinning metal once we get there.

Happy trading!

AY

P.S What to watch Feb 22-26

Feb22-26

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