Gold bullion demand improved this week in India as prices fell to their lowest level in nearly three months, while demand elsewhere in Asia remained tepid as investors waited for prices to fall further. The downtrend would likely accelerate unless gold prices held above multiple layers of support slightly below $1,240. If that area breaks, the shorts and momentum sellers will have a field day.
The shorts are still in control and the momentum is negative. The dollar and U.S. treasuries have taken over the role of safe haven this month and as long as the trade war is creating uncertainty then that will probably prevail. Gold bullion prices are on track for a third straight weekly decline, having slipped 1.4 percent so far this week. Spot gold was down about 3.6 percent for the month, heading for its biggest monthly drop since November 2016.
The euro jumped more than a half cent after European Union leaders reached an agreement on migration. The dollar index against a basket of six major currencies slipped 0.6 percent, having risen to about a one-year high on Thursday.
The Most Important Buy Signal For Gold Bullion Is Here
It is generally agreed that in a Gold Bull Market, the gold producers lead the way, by outperforming gold bullion. To examine this trend we visit Stockcharts.com and pull up a chart that compares mining stocks (GDX) to gold bullion (GLD).
This index bottomed in March and since then the miners have moved ahead of gold bullion.
The first hurdle, at the 50DMA (blue line) was overcome in April. The next hurdle, at the 200DMA (red line), took several months, but it is now in the process of being ‘put in the rear view mirror’. The blue arrow points to the fact that for the past three days the daily range has been above the resistance. The supporting indicators (top and bottom of chart), are positive.
A rise above the green arrow will convince a lot of investors that the gold sector is ‘the place to be’. The timing is likely to coincide with the resumption of trading, after the US July 4th Independence Day Holiday.
Featured is GNX the commodities index, with the gold price at the top. The green lines show the correlation between bottoms in this index and gold. A turnaround in gold is overdue.
This chart courtesy BMGbullionfunds.com shows June is a good time to buy gold and gold stocks. – Peter Degraaf
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