The first is of course the fact that several Asian central banks and Russia are buying gold, and that certainly doesn’t hurt. Plus, we have a lot of geopolitical concerns, and right now World War III is a very serious conversation. So with all this coming together, it makes sense to some extent that people are buying gold.
The $2,530 level is an area where we have seen a lot of resistance in the past, so I would expect some degree of market memory in that area if we were to pull back to provide support. I like the idea of buying dips, but gold certainly seems to be very choppy in this region. We still have British control over the Bank of England. And now that we see the Bank of Japan on Friday morning, the market could see some movement. But at the end of the day, I think a lot of people are trying to figure out what a 50 basis point rate cut actually looks like.
Gold, even though it is a security, is sometimes sold in such situations because people need to increase liquidity and by doing that, or by needing it, they have to sell winners. Sometimes gold suddenly sells very quickly, even though you wouldn’t think this would happen. Be careful, I have a feeling the volatility is only going to get worse than most markets.
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