Sunday, August 7, 2016

A Quick Look At The Gold Market

This week, despite lower prices of gold (since the weekly high of $1,374.2 per ounce, gold retreated to $1,344.4, which means a drop of 2.2%) GLD reported a high weekly inflow of 715,087 ounces (look at the blue bar):

source: Simple Digressions

It was one of the highest inflows into GLD vaults, reported this year. It is another evidence that gold investors behave like real investors  - when the price is lower they are buying.

Look at another chart, this time it shows GLD gold flows, measured on a cumulative basis:

source: Simple Digressions

The red line trending up means that more and more gold flows into GLD, which is a positive indication for gold prices.

Technical weakness

On the other hand, technical analysis sends a sign of a short-term weakness:


1. It looks like there is a sort of resistance at around $1,380 per ounce (red, horizontal line)

2. an indicator, called Chaikin Money Flow, is going down; last time this indicator went down (February 2016, red down-sloping line on the lower panel of the chart) gold prices entered a period of weakness. Currently there is a similar situation (red, down-sloping line on the right of the lower panel)

Chinese are still buying gold, although the demand is lower

Lastly, there is still high demand for gold in China. However, due to higher prices of gold, since the beginning of 2016 the Chinese bought less gold than last year:

source: lawrieongold

Summing up - in my opinion, the bull market in gold develops in the right way. Physical demand is high (for example, GLD and Shanghai), which is the most important message for gold bulls. On the other hand, it looks like we may encounter a short-term weakness in gold prices - signals delivered by the technical analysis opt for such a development.

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