Gold rallied from the July lows of $1077 to test the $1167 level. Gold is believed to be a safe haven where investors put their money during periods of economic uncertainty.
During the last economic recession, gold price rallied to over $1920. Unfortunately, this level has been the highest price since 2011. The introduction of Quantitative Easing by the FED in order to stimulate the economy has eventually put gold in a bear market.
The market is anticipating a rate hike from the FED as early as September. This is bad news for gold bulls because it will have a negative impact on the price of gold. This means that gold prices are more likely to go lower than we saw in July.
Yesterday, the market saw the biggest Volatility so far in 2015, the DOW dropped 1000 points and the market witnessed a massive sell on USD, with risk-off currencies appreciating massively. I was a little bit bothered as to why there wasn't any meaningful rally on the price of gold.
Last Friday, the market rallied to $1167 before the market closed for the weekend. Gold prices opened on Monday for trading at $1164 and the high of the day was $1169. On a trading day when investors were so uncertain about the state of the world economy, I would have expected more money to flow into gold, it being a safe haven, and the price of gold to rally all the way to at least $1200 resistance level. However, the price slid all the way down to a daily low of $1145.
Technically it’s clear we are in a bear market and the rally to the upside was confirmation of a final leg down of price to less than $1000. If prices continue to trade below $1185, we could see prices at less than $1000 before the end of the year.
Bloomberg 24- hour gold chart
