Gold driven by fear – well for today!

Gold futures -daily chart
Gold futures -daily chart

It’s been another roller coaster ride for gold again this week, with many traders speculators and investors now left wondering what are the primary drivers for the precious metal as it continues to lurch higher then lower, driven this way and that in some wild swings. Step back ten years and the price of gold was generally driven by the inverse relationship with the US dollar, underpinned with any inflationary pressures in the economy, safe haven status, and coupled with any temporary supply issues. Since then the world has changed with inflation a dim and distant memory, the inverse relationship with a managed dollar falling out of correlation, and other assets stepping in to take its place as a safe haven. Today, it was the turn of safe haven to take centre stage.

In overnight trading and into the London session on Globex, gold rose sharply higher as global tensions escalated with the GC December futures contract climbing to touch $1324 per ounce as investors bought the metal as a safe haven running for cover, a sentiment that was promptly reversed in the afternoon as the US markets opened, with risk assets taking the lead, and gold falling in parallel, ending the session as a long legged doji candle and a closing price of $1312.90. The precious metal now looks weak once again, and given the associated volumes of Wednesday and Thursday, which fell in a rising market, it will be no surprise to see gold sell off once again next week, given today’s price action, which signals indecision with a possible reversal in due course. Today was a classic example of a market driven by fear, and next week the puzzle will be trying to figure out what will be the driving the price action. It’s not an easy question to answer and the only constant throughout is volume. Whilst the ultimate driver may difficult to identify, volume is always clear and precise in forecasting the future direction of the market.

By Anna Coulling

About Anna 1055 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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