Bargain hunters seek gold

After losing ground in the past few trading sessions, gold is now in demand as traders take advantage of the drop in price.

Gold is trading at $1286, up 0.2%, as short-covering and bargain hunting has helped the metal edge higher. Gold has remained under the $1300 mark for the past three trading sessions and since the financial markets do not move in straight lines, it is not surprising that we are in positive territory today.

Equity markets finished higher yesterday, largely driven by the merger and acquisition speculation in the pharmaceutical sector. Today traders are moving their cash out of equities and into gold.

As I mentioned previously, gold tends to benefit if there is uncertainty in the equity markets. There has been no progression in Ukraine over the past few days, as pro-Russian militants and Ukrainian forces continue their standoff.

Gold is below the 200-, 100- and 50-hour moving averages, which is a bearish indicator. If the corporate reporting season drives equity markets higher, we could see it return to the recent low of $1276. However, if the situation deteriorates in Ukraine, the yellow metal may retest the $1300 mark. 

Spot gold chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.