Important events for traders are occurring literally before our eyes on the gold market. Yesterday, the price broke through the first local support at 1,213 USD per troy ounce (which corresponded to the minimum for the 31st of July, 2018), followed by a slightly more important support at 1,211 USD (a low for the 19th of July). On Friday, the decline continued, and the price closely approached the most important support at 1,204 USD, which corresponds to the low for the 10th of July, 2017. A breakthrough at this level would mean a return to the previous prices of the beginning of March last year. Further targets for the decrease may become 1,194 USD, and further on it is strategically possible to drop to 1,046 USD (level from November 2015).
Gold's behaviour since the middle of April (when the price reached 1,365 USD) has been demonstrating serious changes in the investment world's attitude to this precious metal. Until recently (by historical standards), it was believed that that gold was an eternal asset, and that it would grow if not always, then in times of global crises for sure. A bit later, around the end of 2011, when gold, having reached 1,920 USD, reversed its course, it became clear to thoughtful investors that gold does not grow in just any crisis, but only with the threat of high inflation, and deflation crises, on the contrary, do not add to its attractiveness. But what has been happening with gold in recent months has generally confounded precious metals enthusiasts.
What is the overall global sentiment? Trade wars broke out between the United States and virtually the rest of the world. This, according to the forecasts of virtually all international financial organisations, will lead to a global economic slowdown. In developed economies (the US, EU, UK, etc.), inflation is rising (albeit to the target levels of regulators). Geopolitical tensions are mounting, with Iran recently serving as ground zero (the threat of US sanctions and the counter-threat to close the Strait of Hormuz to oil supplies from the Persian Gulf). A set of such factors previously always and inevitably led to investors looking to gold for refuge.
But that's not the case this time. Not only is gold not growing in the current global climate, but it is actually falling, approaching important long-term levels. This suggests that, having since lost its status as a currency decades ago, gold is literally losing its appeal as a standard and familiar safe haven right before our eyes.
We recommend opening short positions on gold at the penetration level of 1,204 USD.