Gold was firmer as Asian Pacific markets opened overnight. It then surged above $3,700 on the European open, and momentum took it to yet another fresh all-time high. The move reflects continued safe-haven demand, with investors keen to increase their exposure to bullion as global equities stretch further to their own record highs.
Source: TN Trader
Gold’s sustained upward trajectory has been reinforced by the perception that most major central banks (the Bank of Japan being a notable exception) remain committed to loosening monetary policy further.
Last week’s Fed meeting made it clear that the US central bank was focusing on one plank of its dual mandate, maximising employment, rather than the other, price stability (inflation), even though the latter remains stubbornly above the Fed’s 2% target.
This is not to suggest that this Friday’s PCE inflation report won’t be significant in determining whether this upside momentum continues. But investors will also be watching for further evidence that the labour market is deteriorating. Silver extended recent gains, and this morning it hit its highest level in over fourteen years.
Investors are already eyeing April 2011’s all-time high just south of $50 as a longer-term target. But this being the case, investors should be prepared for an increase in volatility in what is historically one of the most volatile financial markets.
Gold and silver have daily MACDs which suggest that both metals are trading at overbought levels. This is not to say that a sell-off is imminent. Markets can continue to be overbought or oversold for extended periods. By the same token, bullish investors shouldn’t be surprised to see sharp pullbacks from time to time.
