Gold prices ready for a break out on the upside
After receiving dovish comments from both the US Federal Reserves Chairman Powell and RBA Governor Lowe, gold prices rallied US$39, or 2.89%. The question is, can gold prices continue to track higher?
Looking at the above chart, we believe the market will retest the US$1,400 per ounce level, but if this level is broken, we can see the price shooting back up to US$1,700 an ounce. Gold prices have been in a consolidation phase (stagnant) for the last decade and that is after a 4 year bull run from 2008-2012. We might be on the path of another gold bull run if the US$1,400 level is broken.
With the market chasing yield, where do you park your money and earn a return higher than inflation? With stock prices reaching all time high levels (investors are questioning if valuations are too high), property prices and lending has stagnated, bond yields are dropping causing minimal potential return on bonds and interest rates/term deposits still falling. Gold is becoming a popular investment.
We can see the gold prices breaking out on the upside in the near term, and with the world moving their monetary stance to stimulate growth, this will cause their currencies to become less valuable thus pushing up Gold prices!
We have placed a BUY recommendation on Gold and established Australian gold producers (Aussie dollar has fallen causing the Gold to Australian dollar to be at all time highs!)
The Australian Markets looks to top out
The Australian Markets continue to roar on the back of Miners and Banks. The ASX200 reached a high of 6644.7 and it looks like it will continue higher, retesting the 6851 level back at the peak of 2007. The positive is that the markets have been trading in an upward range for over a decade and the closer it reaches the upper band as well the heights of the markets, the buying will face extremely stiff resistance or selling.
With a lower interest rate environment or low yielding environment, we expect to see the markets to charge forward and reach new highs but if it fails to reach new highs and stalls around the 6800, the market might have double topped and we will more likely see a big pullback back to the bottom end of the trend line which is roughly 5700 - 5800 or roughly 13% pullback.
We continue to hold our positions and look to liquidate closer to the 6800 levels but we are watching the markets carefully to pick up clues for a reversal but at the moment the bulls continue to charge forward!