Commodities Prices: Gold Markets on Verge of Major Breakout - RichardACox/financialmarkets GitHub Wiki
This year, most of the attention in the financial markets has been centered on the stock market as historical rallies in the Dow Jones Industrials and S&P 500 have generated strongly bullish optimism. But now that valuations in equities have hit extreme levels, many investors have started taking profits and looking for market opportunities in other sectors. In most cases, these types of events favor the precious metals space given their long history of success as a store of value and a price hedge against inflation.
But when we look at the current market context, there are even more reasons to support the outlook for sustained rallies in gold and silver -- and this has already been matched by recent activity in the futures markets. Currently, we are seeing strong trends unfold in gold coin prices and this is something that should continue to influence market sentiment in several areas for the remainder of this year.
Chart View: US Dollar / GOLD
Gold Prices: Atlanta Gold & Coin Buyers
In the chart above, we can see that major historical resistance at $1,260 relative to the US Dollar has recently been breached and this suggests we are in the early stages of an emerging uptrend. Prices have already reached highs of $1,285 and this has unfolded in clearly formed trend waves that have been characterized by a series of higher lows.
Most of this activity has been prompted by increased geopolitical tensions in Russia, Syria, and North Korea which means there is a solid fundamental basis for the latest rallies in precious metals. Market commentary at the Federal Reserve suggests that the central bank has become increasingly concerned about the potential for rising consumer inflation so there is a clear set of reasoning behind the bullish arguments that are being used by investors buying gold and silver assets.
Upcoming Elections
Looking ahead, we are likely to see additional market volatility as the presidential elections in France draw closer. Polls continue to change when we look at the support shown for candidates Marine Le Pen and Emmanuel Macron, and this is something that could influence price levels in ways similar to the UK’s Brexit vote that came in June of last year. Any results that surprise markets and lead to greater stock volatility will almost certainly benefit gold prices and force another test of previous upside resistance levels.
To the topside, the next price level to watch comes in at $1,305 which was the high from last November. Market activity in this region will be highly critical as a break here would suggest a price target of at least $1,365 in relatively short order. The combined effect of geopolitical turmoil, exhausted stock market rallies, and growing consumer inflation indicate that major rallies could be unfolding in the precious metals space. These are all areas that should receive growing market attention over thenext few months.