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With weak equity markets being one of the largest contributing factors to a strong gold price, the indecision being shown by equity traders is having a significant affect. Many of the major global indices are at a delicate stage, edging ever closer to shifting from ‘corrective pullbacks’ to ‘breaking the bullish trend’. Gold traders over the last year have become increasingly reluctant to jump at the first sign of negativity in the markets. A more conclusive indication that equity markets are going to go through a sustained period of pain will be required before the momentum traders are brave enough to increase their exposure.
The gold price is still some way away from breaking the downward trend that it has been in for almost a year, as the battle between underlying demand for the physical commodity and the ready supply of ‘paper’ gold continues. Many of those who are bullish of gold are long-term holders, and as such do not tend to get swayed by the intraday vagaries of the markets. It will only be the re-emergence of the momentum and day traders that will see gold shine once again.