Gold rose again on Wednesday as the market continues to surge upward. The market just broke out of the $1,700 to $1,750 area, and it looks as if we are ready to try out the $1,800 level at this point. The recent consolidation area that we saw was just as we expected - simply a rest in a longer-term uptrend in this market.
The central banks around the world are running a program of devaluation, and as they ease monetary policy, the demand for gold will continue going forward. The economic situation allows for people to buy gold in order to store value. The policies will continue to flood the markets with liquidity, and this always benefits gold in the end.
The recent move down looks now to have simply been end of the year profit taking, and the move we have seen since the start of 2012 looks like a continuation of the last ten years in this commodity. The market is a very technical one, and as it seems to be following historical norms, we expect a reaction every $50 or so. The next targets will be $1,800 - $1,850 - $1,900 and on and on.
The bearish case simply cannot be made at this point, even with the recent parabolic move. The rest that we had looks as if it is going to give the market a chance to build on previous momentum as the bulls step up their purchases. Also, one has to keep in mind that the central banks are net buyers of gold, and these dips offer them a great chance to buy on the cheap.
The outlook for gold cannot be overstated at this point. The market has been one that many have called for to reverse over the last several years, only to burn those people in the end. At this point in time, we are willing to buy pullbacks as we expect the $1,750 level to be supportive now. We also would consider buying a break of the highs from Wednesday as well considering we expect this market to continue. We will not sell at all.
Gold Forecast February 23, 2012, Technical Analysis
Gold Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3