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Gold glows as safe-haven beacon

Collapsing equity markets and tumbling emerging-market currencies have increased the appeal of the precious metal.

Thursday’s equity market fall is looking a little more serious, as the first half of Friday’s trading has seen little appetite from the buy-on-dip trader. At the same time as this weakness was afflicting the equity markets, we have seen a squeeze on a number of emerging market currencies. On the peripheries of Europe, the Turkish lira has been hit hard over the week, and even the intervention of the central bank was only enough to slow down the process for a limited time yesterday. This squeeze has also throttled the Argentinian peso, which was forced down to a twelve-year low.

The misfortune of others tends to be to gold’s benefit, and the fortuitous timing of these equity market and currency issues has increased the metal’s allure. Couple this increased demand for gold’s perceived security with the technical picture, and we could be set for a squeeze higher in the spot market.

A close above $1268 would put the bias on the upside, with the completion of an inverse head-and-shoulders pattern and an increased possibility of a retest of the $1300 levels. Above $1300, tougher tests will no doubt come for those hoping to see higher levels.

Spot gold chart

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