Recent price action has suggested that Gold is ready to kick start its movement and price will break last year’s high. I would discussing the Gold from 2 perspective. The Technical and Fundamental.
In January we had the Gold price trying to break last years high at 1357.61 but failed to keep its buy momentum after making a high of 1366.08. We then saw price dropping to 1307.06. The sell momentum however is much lower than previous sell. More ever all prices stop dropping further after testing higher time frames support. From experience if the price is ready to drop, higher time frames support are not respected. Price action at support levels show a lot keen buyers making me believe that the gold buyers are lining up for a buy move. At a glance, it is safe to say as long as 1250 support is not broken, gold is a buy at dips.
1) On January 2018, China’s officials recommended to slow down its US Bond buying policies or put it to a complete halt. Thus we would have a drop in demand for US Dollar. China is now a part of Special Drawings Right which gives them the ability to print RMB. A full scale currency war is in motion and this is a war which neither party will win. Eventually affected countries would need to move to a more stable monetary anchor and that anchor is gold. We need a few more year for the Cryptocurrency to mature thus making gold the go to for the moment.
2) The emergence of Cryptocurrencies proves that Fiat currency life span is coming to a juncture where its users are getting frustrated with the constant devaluation. Like it or not, Cryptocurrencies is here to stay and evolve into a new payment system side by side with Fiat currency. Cryptocurrencies are still in its infancy. It maybe able to take in a trillion or two market capitalization at this moment. It is just not ready for a mass transfer yet. So a big chunk of money would still flow to gold in the event of a breakdown in economy.
3) Trump weak USD policy is not helping the US Dollar cause either. It is understandable as Trumps need a cheap dollar to boost US’s economy. As gold is traded versus US Dollar, a weak dollar would automatically mean a strong gold.