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Wednesday, 21 September 2011

Gold: Topping for Now?

The economic growth in Europe and in the United States is expected to deteriorate further and the request for raw materials should fade as well. The U.S. dollar might take the role of the safe haven currency over the short/medium term, while commodity currencies should retrace further from the highs. 

Gold has reached an important  top at around 1900. A move above 1950 is necessary to reinvigorate the long term bull-trend. A breakout failure would instead trigger selling orders, especially if the level of 1710 is overcome. The downside target could be 1650, eventually 1550.

A “wait and see” approach is setting in among investors. News has not been encouraging. The Gross Domestic Product (GDP) is expected to stay below 2% this year. Unemployment is still high, while housing is below water. President Obama jobs bill proposal will depend on the Congress decision. So, interest rates should stay low for the time being.  

The European crisis is hitting and the effects will soon reach consumer confidence and diminish demand. Some investors might be using gold to restore losses elsewhere, or simply to cash in the long run of the recent months. If gold would decline, it should be only temporarily. The yellow gold remains one of the best hedges against current challenging times. The bull trend will resume, once the world economy will start to move again.

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