Are We There Yet? Where is Rock Bottom for the Gold Price?

Market Update (23rd August 2014) Market Update (18th August 2014)

Last week (the week beginning 11th August) the international gold price looked like it would continue to ricochet around like a blind bumblebee. At the end of last week the gold price tumbled from its high point. By the middle of last week it had reached its peak at 1322 USD/oz, then by the close of the markets on Friday it was back down at 1311 USD/oz. Obamas decision to commence airstrikes on Iraq; the continuing conflict between Israel and Palestine; and the crisis in Ukraine are all likely to have had significant effects on the gold price over these last weeks.

Moreover, figures at the end of June showed that the USAs wholesale inventory had grown at a rate of just 0.3%, and were expected to rise by only 0.7%. After the release of these woeful figures, JP Morgan Chase and Barclays, among other investment banks, one by one downgraded their forecasts for the USAs GDP growth rate.

Wode Gold Onlines chief gold analyst, Song Hao, thinks although the gold price has fallen to a trough where it has begun a series of low points and higher low points, that this model may be seen as a sign that the market is about to recover and pick up. As demand pressure falls, and prices correspondingly fall, a bull market may emerge almost overnight.

Technical analysis seems to support this view. Using the Relative Strength Index (RSI) and the Moving Average Convergence/Divergence (MACD) index, a bull market seems likely to appear. A few Wall Street investors are of the opinion that new military action often props up the gold price as the turmoil and perceived disruption causes people to run for what is seen as a safer investment in times of trouble.

There are also those who feel that this years unexpected gold price rise will soon end, and that before the end of the year we may see falls of something like 12%, with the gold price going as low as 1150 USD/oz. Interestingly however, Song Hao thinks that 1150 USD/oz is pretty close to the production cost of gold, and so that may well represent the markets rock bottom line.

If this analysis proves to be correct, then in such an environment where the only way is up, it seems like a perfect time to invest in bullion coins.