- In my daily analysis of the gold market, the first thing that comes to mind is that we continue to bounce around the 50 Day EMA.
- This is an indicator that a lot of people of course like, so it does make a certain amount of sense that traders will be looking to get involved in this general vicinity.
- However, what I don’t see here is a lot of momentum and I think gold is starting to set up for some type of sideways range bound pattern.
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Plenty of Reasons for Range Bound Trading
There are a whole plethora of reasons why the market might go sideways for a while, not the least of which would be the fact that we are at the very end of the trading year, and most traders are not looking to put on big bets at the moment. It’s worth noting that gold has had a strong run most of the year, and therefore it would not be out of the ordinary for traders to try to collect some of the profit.
There is the question of yields in America, which seemingly never seem to go down for any length of time, and that does work against the value of gold. The idea being that it is much easier to either store a piece of paper or electronic asset than it is to store thousands of ounces of gold. For this reason alone, bigger funds tend to prefer higher yields over gold itself. Most retail traders forget about the storage cost involved.
One thing that is helping gold is geopolitics. After all, it seems like the chance for further tensions around the world is seemingly unending, and that of course helps the whole idea of the “safety asset” aspect of owning gold. After all, it’s been that way for thousands of years and it doesn’t seem like it’s going to change anytime soon.
Regardless, this is a market that I have no interest in shorting, so I guess I’m more of a “buy on the dips” type of short-term trader. Longer-term, I do believe that gold goes higher, perhaps much higher. There is a serious problem out there with some of the spending the governments are doing, and ultimately that should help lift gold over the longer term. However, between now and New Year’s Day, it might be somewhat sideways and quiet.
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