Gold Market Wire
News, analysis and commentary for gold traders and investors
Gold Market Opening
Is Gold Breaking out of the Triangle?
May 14, 2020 - (Gold Market Wire) - Gold is finally starting to break out from the symmetrical triangle, which has just about run its course. It's still early days, but the first blood is going to the bulls as the chart shows.
One thing that the triangle's break out shows for bulls is that establishing length here wouldn't really fall into the categorey of "chasing strength" which we so assiduously work to avoid. So, for people with a bullish mindset, it may be a good place to get long.
Our basic modus operandi has been for a pause and a pullback in May, with a rally into June. Was that it? Is the pull back over? It could well be. One factor we notice as being bullish on Gold is the increasing lack of public confidence over the handling of the Covid-19 crisis by governments. Up until now, public reactions to the lock down policy have been limited, but with the carnage of a destroyed global economy now lying open for all to see, the pendulum may be ready to swing the other way.
We continue to believe that the health of the European banking sector, along with its possibilities to unleash a global contagion that will be far worse than Covid-19 in terms of the damage to Human welfare and life, is a pivotal factor. If the European banking sector starts to keel over, Gold is going to rise - and rise strongly. So we return to yesterday's theme of watching the CoCo bonds, discussed in yesterday's article "Want to see the REAL price of risk?", as an early warning mechanism. Presently, they are lower by about 1.25% percent today, and in that we see a positive for the Gold price. On the other side of that argument lies the danger presented for a shock reversal in equity prices that could drag Gold lower. So, unlike the past week leverage must be avoided
This week's closing price is going to be an important one.