This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The gold price has done nothing over the seven-month period since then, having recorded a low of $1185 in late December. This trading range is likely to continue.
Last December’s fall to $1185 marks the second occasion the price has tested the $1184-95 support band since the all-time high was established in 2011. Neither of the subsequent rallies has impressed me much, however, and there is a strong technical case to suggest this most recent rally will fail too.
Although the fall to $1197 completed a 33.33% correction from the secondary high in October 2012, it is the even stronger support in the $956-1035 band that interests me most. An extension of the broader correction to within this band would take gold back to its G1 and G2 levels, or, in other words, complete a 50% correction from its all-time high.
Gold needs to regain the territory above the $1530 level in order to abort the current downtrend. Until this occurs, the risk remains to the downside.
Recommendation: neutral. Buy aggressively on any fall to $1035.