So far, the stock market is having a very difficult time in 2016, with S&P 500 down more than 9%. On the other hand, the world’s favorite metal –gold- is up nearly 10% year-to-date and hit a four-month high of just under $1200 per ounce on Monday before dipping 0.7% Tuesday to $1189.30. In other words: gold price is sky-rocketing!
Now, the weekly gold chart shows a series of fan downtrend lines. This is a very long-term trend reversal pattern. The four downtrend lines have a common starting point from the high in October 2012. This has been a dominant feature on the gold chart for quite some time now and the pattern it formed cannot be ignored.
Another reason why gold is rocketing could well be in response to the pressure that hangs over U.S. equities as stock market falls after years of upward movement. The uncertainty drives investors back to gold, the price of which is known to follow an almost inverse trend to the S&P 500 index of the last 5 years.
Naturally, we should all wonder if gold will continue its run. After all a seasonal rally in gold driven by Chinese New Year won’t last, but if the price of this yellow metal is being pushed upward by the volatile state of U.S. equities, then the price of gold may climb higher as markets continue to shudder. On the other hand, gold was not the only metal to enjoy considerable boost in its price. Silver, has also risen about 11% which made some investors very happy. The rise of silver is not exactly surprising since it is also a precious metal alongside gold.
All things considered, the price of gold is currently sky-rocketing. Whether it’s because in times of uncertainty people turn to gold or due to the Chinese New Year, it remains to be seen. If one thing is sure, gold is certainly flying high!