Commodities | Aug 22 2011
Gold Ignores Overbought Signal, $2000 Per Ounce Remains In Sight
By David Song, Currency Analyst
- Gold Hits Record High on Risk Aversion
- Guest Commentary: Does the Market Volatility Linked to the Recent Gold Rally?
The spot price for Gold hit a fresh record high of US$1878.15/oz and the near-term rally may gather pace in the following week as market participants continue to look for an alternative to the reserve currency. As the heightening fears surrounding the global economy bears down on investor confidence, the flight to safety may continue to increase the appeal of the precious metal, and it seems as though gold traders have their sights set on US$2000/oz even as the bullion remains heavily overbought.
Market rumors have already emerged that the CME will take additional steps to further dampen speculative trading even after the group raised the margin requirement for Gold by 22% on August 10. However, the bullish sentiment underlying the precious metal continues to point towards higher prices, and the bullion may set fresh record-highs in the days ahead as we’re likely to hear central bankers across the globe cast a dour outlook for future growth.
With world policy makers scheduled to attend the Jackson Hole Economic Policy Symposium on August 25-27, the general consensus amongst the group could highlight a growing concern for a slower recovery, and there could be talks of maintaining monetary stimulus on a global scale given the ongoing turmoil within the world economy. Indeed, the European sovereign debt crisis is likely to be a major topic discussed at the convention, but we may see Federal Reserve Chairman Ben Bernanke show an increased willingness push through another quantitative easing program in an effort to shore up the world’s largest economy.
In turn, Gold prices looks poised to advance further in the following week, and we may see a push towards $2000/oz as it benefits from safe-haven flows. Although the precious metal remains overbought, we probably won’t see a correction until the relative strength index falls back below 70, and the technical outlook for the bullion remains fairly bullish as it trades within an upward trend channel.
The views expressed are not FNArena's (see our disclaimer).
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