Gold Outlook – Not a Safe Haven Anymore?

How likely or unlikely is it that the gold bounce keeps going strong?

Gold rallied from the July lows of $1077 to test the $1167 level. Gold is believed to be a safe haven where investors put their money during periods of economic uncertainty.

During the last economic recession, gold price rallied to over $1920. Unfortunately, this level has been the highest price since 2011. The introduction of Quantitative Easing by the FED in order to stimulate the economy has eventually put gold in a bear market.

The market is anticipating a rate hike from the FED as early as September. This is bad news for gold bulls because it will have a negative impact on the price of gold. This means that gold prices are more likely to go lower than we saw in July.

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Yesterday, the market saw the biggest volatility so far in 2015, the DOW dropped 1000 points and the market witnessed a massive sell on USD, with risk-off currencies appreciating massively. I was a little bit bothered as to why there wasn’t any meaningful rally on the price of gold.

Last Friday, the market rallied to $1167 before the market closed for the weekend. Gold prices opened on Monday for trading at $1164 and the high of the day was $1169. On a trading day when investors were so uncertain about the state of the world economy, I would have expected more money to flow into gold, it being a safe haven, and the price of gold to rally all the way to at least $1200 resistance level. However, the price slid all the way down to a daily low of $1145.

Technically it’s clear we are in a bear market and the rally to the upside was confirmation of a final leg down of price to less than $1000. If prices continue to trade below $1185, we could see prices at less than $1000 before the end of the year.

Bloomberg gold chart one day
Bloomberg 24- hour gold chart
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