Golds biggest influence, fear or greed?
In the world of quantum physics, it
is accepted that a cat can both be dead and alive at the same
time. The cat example has been used to illustrate the condition
in quantum mechanics of which an item can be shown to be in two
difference states at the same time. In gold we are consistently
trying to define the market as reacting to one factor or
The two “states” of the gold market
that are battling for attention at the moment are fear, which
embodied the safe haven role that gold has traditionally fallen
under. And greed which is the rush for cash, or profit-taking,
that has been observed as one of the main reasons for the
retracement from the the highs seen in August.
We tend to fall under the trap (much
like the traditional view that people took in physics) in which
the factors that influence the price are binary (as in it is
either one or the other, 1 or 0). What I can currently see being
developed is a market in balance for the short-term, being both
a safe haven and a way to free up cash for those weak longs in
the market and in-effect cancelling each other out (being both dead and alive at the same time).
What this means for the gold price
should be a almost deadly dance of profit taking verses buying
on the dips, with strong buying demand from India this month and
the CAT-astrophic economic news coming out of Europe almost
every day. We should see a relatively stable gold price for the
short term, with resistance of the 25 day moving average US$1680
and the psychological level of US$1700 being the key price
points to look out for - and support around the $1615 level.
Unlike physics however, gold is
determined by the human factor, which is an unstable beast at
the best of times, and it won't take much to tip the scales to
destroy its current delicate balance. More economical turmoil
can tip gold in almost any direction, but as seen lately, the
gold market will probably act negatively towards it at first to
free up cash, before its traditional safe haven role kicks in.
Volatility will be the keyword once
the peace is broken, lets just hope most of us are not cut short
taking a cat nap when it happens (unless of course, you are
Sharps Pixley, London