WTF Chart of the Day: Important Juncture for Gold in Coming Months
By LawrenceFollowing is my channel chart on gold. I have posted the same chart in the past which pinpointed multiple turning points over the years. It is worth reviewing this chart again for clues to the direction of gold in second half of this year.
Notice gold has been parked around 1300 area which is the midpoint of the year. At this point gold is mildly bullish as it manages to hold above the channel lines. As long as it can defend 1280 area, it has a chance to retest 1340 and above. If gold fails to hold 1280 support, a flush to the low made in year 2013 will be inevitable.
Unluckily, the rumour of China about to launch its gold trading by end of September has surfaced. The contract will be priced in Yuan. This presents two problems to the gold market. First, it will suck the liquidity out of the US dollar priced gold contracts should people choose to trade the newly introduced one. Second, it will also force delivery of existing gold stored with Britain and United States among the major players to the storage facility in China.
The immediate consequence of such liquidity issue is not necessary bullish for gold. The confusion and fight among the exchanges to stay in control of the gold trading markets will negatively impact gold priced in US dollar. Until the messy condition is resolved, gold price will likely enter a very volatile period in coming few months.
Possible implications towards the USD too….
Gold only represents a very small amount of international trade. The impact on USD, at least in short term, will be quite small. The change of dominance in the gold market, however, has symbolic importance for China in establishing its status.