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MENAFN- Daily Forex)
- The month of January for gold could be very important. This is because we have seen such bullish momentum in this market for so long, that it now becomes a question as to whether or not we can continue the momentum, or if we need to settle into some type of range.
- At this point in time, I certainly don't have a scenario in which a willing to start shorting the gold market, but I would struggle a bit at this point to get overly bullish.
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I could talk about the technical analysis, but it's obvious that the trend is bullish. I don't really want to go down that road, because there are a handful of things that I am watching that I think will make more difference to where gold goes than something along the lines of the trend line, which I have on the attached chart.
For example, the first thing to pay close attention to will be the interest rates in the United States, and what's going on in the 10 year note. As I write this, we are at about 4.58%, which is extraordinarily high and makes the owning of bonds much more interesting than trying to buy gold and pay all the money necessary to store it as well. In other words, with higher interest rates, typically bonds are much more attractive.
The second thing that I would pay close attention to is the geopolitical situation. The geopolitical situation certainly could be bullish for gold given enough time, but as things stand right now, it looks like it's not enough to get people overly aggressive in this market. That being said, any flareup in the Middle East could drive gold higher, just as a flareup in Ukraine could. I think at this point in time though, the market is pretty much exhausted with the idea of worrying about that, and in this environment, I think that it is probably a somewhat minor point at this juncture, but you never know, we could see something truly shocking happen, and that could change the entire outlook.
The third thing that I would pay close attention to would be the US dollar itself. Keep in mind that the US dollar is considered a safety asset, so clearly both can go up at the same time. However, if we do see the US dollar truly take off and start gaining from here, then that probably works against gold as well. As things stand right now though, I would postulate that we are very likely to be somewhat sideways in January, if not slightly negative. That's not a sign to start shorting this market, rather it's probably assigned that it might be somewhat neutral.
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