Gold Demand Jumps In 2016…
Gold Demand Surges On Crumbling Economic Data…
Without question, investors are seeing a rather tumultuous start to 2016…
Equity market volatility is surging thanks to a rash of worrisome global economic data. Not only is China still struggling with slowing growth, but the US isn’t faring so well lately either.
Recent manufacturing and Fed economic activity reports suggest the US may be on the cusp of recession.
But that’s just the start of it…
Plunging oil prices and shaky credit markets have some well-known investors warning of a situation similar to the 2008 financial crisis.
Some eerie similarities have investors scooping up precious metals at a feverish pace in early 2016. In fact, the US Mint sold nearly as much gold on the first day of 2016 as it did in all of January 2015. Silver sales were equally as impressive.
What’s more, capital inflows into large gold ETFs have been rather surprising this month. The SPDR Gold Trust $GLD saw 21.8 tonnes of the yellow metal added to the fund’s holdings the first three weeks of 2016.
That’s a recovery of 1/3 of the total outflows the fund saw in all of 2015!
While one month doesn’t yet make a trend, the recent buying activity suggests sentiment is quickly shifting back in favor of gold.
With the metal trading near $1,100 an ounce, should you start buying like crazy?
Let’s look to a chart for guidance…
As you can see, gold is still stuck in a well-defined downtrend. Over the past year, the metal carved out lower lows as investors sold into each rally to the 200-day moving average (red line).
While it may be tempting to throw caution to the wind and dump all your investable capital into gold due to the quickly increasing odds of an economic downturn, caution is still warranted.
The yellow metal must surpass and hold above the 200-day moving average before I would consider making a significant investment. Such a technical achievement would mark an end to the multi-year downtrend and possibly the start of a new uptrend.
Now that’s not to say you can’t make a risk controlled bullish trade in gold right now…
Judging by the technical pattern in the chart above, there’s a very good chance of the metal rallying to $1,125 or higher in coming sessions. As a result, if you’re quick, you may be able to pulls in some hefty gains on a looming rally.
How do you capitalize on a potential upturn?
Gold ETFs offer investors a relatively efficient means to trade the safe haven commodity.
Whatever your plan for gold, be sure you properly position size your trade and follow a well-defined risk control process!
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
Category: Gold, Precious Metals
