Chart 1
After the double-top, comes the double-bottom
During the invasion of Ukraine by Russia, investors flocked into Gold and drove its price up to about 2050$. As it is usually the case, buying during panic never yields good investment returns, and the price has fallen more than 10% since then. Interestingly, the price reached in March of 2022 the level that it also topped-out in August 2020, ie around 2050$, which has created the technical conditions of a double-top (red line), a negative formation. Also interestingly, Gold found support at around 1685$, which was the low of the previous big correction in early 2021, creating the technical conditions of a double-bottom (green line), which is a positive formation.
Chart 2
And the short-term resistance line seems broken
The rebound of Gold towards 1800$ has created, as mentioned, the positive technical conditions of a short-term double-bottom. On a more positive note, the short-term resistance (red line), which is in place since the peak in March seems to have been broken and the move higher could continue. Of course, these technical developments do not guarantee at 100% a move up or down and should not be followed blindly. They do provide however signals for potential entry points for those investors who are already interested in gaining access to Gold.
Chart 3
The second half of the year is usually when jewelry physical demand picks up
Finally, the summer time is usually the worst season for physical demand for Gold, used for jewelry. But as the wedding season in India and other parts of Asia is approaching, as well as the Christmas holiday season, towards the end of the year, demand starts to pick up already in September. The chart (by Satista) shows the quarterly physical demand in metric tones for the jewelry industry and the yellow circles illustrate the rise in demand during the fall and winter, for the last 5 years. A similar pattern should be seen this year too, providing some tail-wind to the price of Gold.
Disclaimer
• The content of this document has been produced from publicly available information as well as from internal research and rigorous efforts have been made to verify the accuracy and reasonableness of the hypotheses used. Although unlikely, omissions or errors might however happen.
• The data included in this document are based on past performances and do not constitute an indicator or a guarantee of future performances. Performances are not constant over time and can be positive or negative.
• This document is intended for informational purposes only and should not be construed as an offer or solicitation for the purchase or sale of any financial instrument and it should not be considered as investment advice. The market valuations, views, and calculations contained herein are estimates only and are subject to change without notice. Any investment decision needs to be discussed with your advisor and cannot be based only on this document.
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Sources of the charts 1 and 2: Factset S.A., Chart 3: Statista