During the last month gold price swinged on the both sides. Every new price development provoked hope or fear among market participants. Though, short-term volatility is not a sufficient factor for long-term investments. The market should be always estimated from different points of view and their priority. So let take the long-term perspectives.
One of the most important drivers of gold is currencies. The yellow metal is a universal hedge commodity with great popularity. Investor from different countries and currency share the same interest in the metal. So we should respect the value of different currencies in respect of gold. To build the monthly outlook we will consider the mid and long-term driver with the gold prices in various currencies.
To foresee what awaits gold in February 2013 we have to look few weeks back. In January, the the yellow metal prices fell under the 300-day moving average. This is an underestimated factor of great long-term importance. At present, gold prices are stabilizing. That is normal and follows the historical trend. The market volatility is not often seen just after the drop of 300-day moving average. But history says that it will certainly come. So we could expect a good rally in February.
Let’s pay attention to gold ETF in order to see what happens in mid-term. Last week prices went down, yet they are still above the declining short-term resistance. In January the short-term volatility was strong. But the average price has moved very little over the same period.
The situation in 2012 was a lot similar. Back then the see-saw short-term volatility turned in a huge rally. So expect something similar this year.
Gold corrected after a short-term strong upswing last week. Also the metal managed to move higher till the end of the month. In the same period of 2012 the situation was alike. The market was bullish then and possibly it now would be bullish now.
If gold rises above the declining medium-term resistance price, the rally will be strong. Though, this is not necessarily happening briefly. So let observe the yellow metal in term of currencies.
In respect of the euro we can expect some weakness on a short-term basis. From US dollar point of view it is necessary that gold have to decline. That is because the metal can’t rally right after the greenback weakens. Euro-priced gold could move a bit lower. If the dollar declines at the same time, the euro gold will rally.
The situation is different form the perspective of the Japanese yen in gold. The February outlook is rather bullish for the yellow metal. It is expected that the prices would reach a breakout above the ones seen in 2011. There is firm evidence that this is going to happen. The breakout prices keep their positive pace for 3 day in a row.
At the beginning of the month we see few factors which will drive the market in February. The yellow metal price in euro is still far from bullish. Also price volatility should be awaited in the upcoming trading weeks. Don’t let the number of short-term movements confuse you. Focus on what’s important. Observe the gold developments from long-term perspective. Don’t worry if the are no strong weekly drivers.
There is only one significant factor you should consider at the moment. The precious meal gold slid below the 300-day moving average and rose above it shortly. Bottom prices will very much likely not be seen in February. There is a question, though. The consolidation may finish shortly but more volatility could be seen before firm rally. Yet, the rally is almost certain but it time is still not precisely predictable. We should await the next upside movement of gold since all the factors are in place. The euro-priced gold would be a strong driver for the overall picture. The long-term yellow metal investment continues to be a good move in February.
