Gold Firm Despite Currency Volatility
Source: Mineweb, David Levenstein (8/16/10)
"Gold looks set to break above the 50-day MA."
The selloff in U.S. equities intensified following a string of disappointing data and the DJI fell 3.3% by the end of the week. After hitting a major support level of 80, the U.S. Dollar Index rallied strongly, possibly due to short covering initiated at this level. Even though the USD rose almost 3% on the week, gold prices remained firm.
During the past 10 years investment demand for gold has increased 250. In China, sales of gold bars and coins increased 40% in the past six months. And, with the introduction of the new liberalized trading rules recently introduced in China, eventually hundreds of millions of Chinese citizens will have access to gold-linked investment products. The country is expected to increase mine production by 5% this year to 330 tons, again solidifying the nation's position as the world's number one producer.
Gold has now rebounded $60 since its recent low made toward the end of July. In the last week, the price consolidated above $1,200/oz. (red circle) and it looks set to break above the 50-day MA. I believe that the prices will soon test the $1,220/oz level.