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Bullish Trend for Gold Will Persist

August 16, 2010 at 15:48 by Vladimir Vyun

Golden Jelewry Will Be a Popular Gift in India and China Soon, Driving Prices for the Commodity Even HigherGold prices declined this summer, which can be expected, as summer is traditionally bad season for gold (among some other commodities). What’s important, prices fell from the all-time high, but remained on very high level historically. Despite recent declines, most traders remain very bullish on bullion, and this outlook proves correct (at least for now) as the precious metal resumed its climb to higher level.

The first reason to be bullish is seasonal demand. The period from September through December always was strong period for gold historically and we have no reason to believe this year to be an exception. There are many holidays, which are favorable for the precious metal, including Islamic Ramadan, at the conclusion of which many Muslims buy gold for good luck. Then, there is wedding season in India, historically biggest market for gold. Moving to the West we’ll have later the New Year and Christmas, and returning to the East the lunar New Year.

For longer term, trader can consider other factors (which actually influence prices in short term too). The obvious upward driving force is the concerns for the global economic recovery, caused by troubles in Europe and US. In the same time, Asia becomes more prosperous, especially China and India. Gold historically has great appeal for the people of these countries, not just for its aesthetic value but also as a safe haven for hard times. This means that they tend to hoard gold, but aren’t inclined to part with it easily. And the demand for gold will only grow as the citizens of India and China are becoming richer.

So, where gold is heading? Obviously, higher. For the short term, it may rise $100 or $200 higher before pausing its rally, but for the longer terms it has potential to rise much, much higher. Of course, some correction may be possible, but level of $950—$1050 should be level of support.

If you have any questions or comments about the future trading for the Gold, use the form below to reply.

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