A breakout in Gold Wednesday

Gold prices reversed Wednesday and moved smartly North after the US Fed said it would maintain low interest rates until late Y 2014.

The US Fed also promised to stay accommodative. That is really “Dovish” and we are seeing a lot of players run to Gold.

The US Fed said that inflation remains subdued, a good thing for Gold. “Inflation will be created … the Fed is artificially creating inflation for the next couple of years.” The US Dollar index sold off on the news as more easy money means a devalued USD. When paper (fiat)currencies lose value, Gold becomes appealing as a safe haven asset.

The US Fed saying no rate increase to at least Y 2014 is a sharp rally incentive for the Gold Bulls as low interest rates to continue w make Gold a good alternative and not expensive to maintain. The rise in Gold also triggered Short covering where investors who had been betting against Gold bought back positions.

A popular Gold trade lately has been to Short the precious Yellow metal, as prices reached 1,670 and then cover shorts, as the metal hits 1,650.

The result was a tight technical trading range for Gold. If Gold cracks 1,680 on a closing basis I see Gold going to 1,720 next.

Gold last traded at 1692.50 + 28.00.

Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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Posted by Shayne Heffernan on Jan 25th, 2012and filed underGold, Latest News, Metals, Paul Ebeling.You can follow any responses to this entry through theRSS 2.0Responses are currently closed, but you can trackback from your own site.