Can Gold Rebound After Down Year?
Today’s Spotlight Market
Gold futures had their worst showing in 13 years in 2013 and the metal?s worst year since 1981.? The metal hit bear market conditions during the year and funds were heavy shorting the metal, especially in the last quarter of the year.? Traders are now pondering if the sell-off was excessive in light of the economy recovering.? The large speculative short position certainly suggests that conditions could be setting up for a short covering rally..
Fundamentals
The fundamental outlook for Gold can be seen as mixed.? On one hand, the US economy is recovering sufficiently enough to warrant the Federal Reserve to scale back its asset purchases.? This suggests that demand for Gold jewelry and industrial consumption of the metal could be on the upswing.? Smaller speculators are not giving up on the metal either.? The US Mint sold 56,000 ounces of American Eagle Gold coins in December, which is the highest demand since June.? Annually, American Eagle coin demand increased 14 %.? On the flipside, the Fed weaning the banking system off of asset purchases suggests that the cheap money era may be nearing an end.? This may decrease Gold?s value as an inflation hedge.? Furthermore, many traders are not convinced that the economy is on as solid of footing as the Federal Reserve would like to believe.? Decreasing liquidity could be detrimental and derail the recovery, according to skeptics.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the February Gold (GCG14) contract hold support at the $1,200 level. Failure to hold the $1,200 level could be seen as a particularly negative for the Gold market.? A breakdown could bring another wave a heavy selling pressure, which could bring about a test of the pivotal $1,000 mark.? The oscillators are, for the most part, as neutral as they can be.? The 14-day RSI is hovering near the 50 mark, while 20-day momentum sits at the zero line.
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