Gold Gives Another Short-Term Buy Signal
A commentary on recent events by National Gold Group’s Michael Carr – December 10, 2012
Long-term investors often try to ignore the short-term moves that occur in the market. While it is important not to make long-term decisions based on panicked reactions to short-term moves, it is possible to derive information about trends that unfold over years from market action that is completed in weeks or days.
Recently, gold prices have pulled back towards the 200-day moving average, an indicator that many analysts use to determine the direction of the trend. With prices holding above this level, the trend in gold prices remains up.
In addition to maintaining its uptrend, last week’s price action offered a buy signal from the stochastics indicator. In the past, one month after this buy signal, gold has gained an average of 2%, offering a short-term price target of $1,740 an ounce.
Some analysts are calling for gold to break out after the Federal Reserve meeting that will be concluded on December 12. The Fed may announce its plans for quantitative easing in the months ahead. If the Fed extends it current programs, or expands its purchase of market assets, traders may become concerned about inflation in the long-term. Eventually the Fed will need to sell the trillions of dollars of assets it holds and no one knows what the impact of that action will be.
In the short-term, the confluence of buy signals ahead of the Fed’s meeting could indicate traders believe that the Fed will expand its easing programs and unleash inflation in the long-term.
The above commentary is for informational purposes only and is not a solicitation by National Gold Group or Michael Carr. It is the commentator’s opinion only and not intended for investment recommendations, and does not necessarily reflect the views of National Gold Group. Any references to outside sources are believed accurate. Past performance is not a guarantee of future results. All commodities involve risk. Investors should consult their financial advisor before making any investment decisions.
