Gold:Price Holding Steady But Action Ahead
New York (Mar 14) The ascent of gold in 2016 has been nothing short of spectacular. On December 31, 2015, the yellow metal closed the year at $1060.20 per ounce. The price seemed poised for more losses in 2016; after all it had been doing nothing but making lower highs and lower lows since 2011.
However, gold came out of the game like a Triple Crown winner in 2016; as of last Friday, it was trading at $1250 per ounce, around $190 or almost 18% higher in just the first 10 weeks of the year. Gold has been the best performing asset in a year dominated by fear, uncertainty and divergence in markets.
Last week, it looked like gold was going to move lower. The head of commodity research at Goldman Sachs has been talking gold down for quite some time and it looked like he was finally going to get it right. That was until the dollar fell over 1100 points last Thursday.
Steady at recent highs
On March 10, the President of the European Central Bank Mario Draghi announced a 10 basis point rate cut to negative 0.40%. He also said that the ECB would increase its program of quantitative easing from 60 to 80 billion euros each month including the addition of some corporate debt to the program. While this dovish move should have caused the euro to move lower, the market decided to focus on the final statement of the central bank President. He said that there would be no more rate cuts. The euro took off to the upside and the dollar plunged after the statement.
In frantic trading conditions, the euro posted a huge gain moving from $1.08225 against the dollar to highs of $1.12195 on heavy volume. The move in the euro created a bullish key-reversal trading pattern on the daily chart.
At the same time, the March dollar index futures contract moved from 98.50 to 95.985, posting a bearish key reversal trading pattern on the daily chart.