Although not a technical level, the psychological level of $1400 looks set to be attacked once again as gold has enjoyed a bullish afternoon of trading. This increase in enthusiasm for the precious metal has come at the same time as an upturn in the equity markets. With the UK shut on Monday due to a bank holiday, it is possible that we are seeing the results of a little bit of book keeping that was unable to be done yesterday due to the knock on effects of the NASDAQ being down.
Gold has made steady progress since its lows in late June, managing to claw back 13%. However the precious metal is still 16.5% down in 2013 overall, and therefore continues to have a mighty battle on its hands to move into an out-and-out bullish run.
A squeeze in the physical metal has benefited gold, following over $60 billion of write downs from the major mining companies. Along with the supply side being somewhat diminished, demand has picked up in China which once again appears to be back in a cyclical growth phase.
The major cloud on the yellow metal’s horizon will be the generic weakness in so many of the developing nation’s currencies. India, the second largest global consumer of gold, has witnessed the Indian rupee collapse against the US dollar, and as such its buying power will have been dramatically weakened.