Gold is a long-term safe haven, albeit a very volatile one. However, even if it does continue to rise, there are immense challenges ahead that could keep it from regaining its former glory. In fact, a number of factors have already begun to take shape. Let’s take a look at what they are, and how they could affect gold.
Fibonacci 38.2% one-day at $1,808 will be challenged
The S&P 500 index is now approaching a 38.2% one-day Fibonacci retracement level at $1,808 after it bounced from a low of $666 during the 2008-2009 recession. The price has tested that level, but the market has failed to close below it. However, this Fibonacci level is considered a potential downside cap.
One of the most popular technical analysis tools is the Fibonacci retracement. This tool helps traders determine support and resistance levels. When used in conjunction with other technical analysis methods, it provides a clear picture of where the market is headed.
A chart of the S&P 500 shows that the price stalled for a bit, trying to move higher. It eventually broke through the swing high. After a few days, the price resumed its upward trend. On July 14, the market tested a 38.2% Fibonacci retracement level and then tried to rally.
Although the S&P 500 was unable to close above that level, the index has maintained its consolidation near that level. Now, it looks like the bears will test it.
Fibonacci retracements are a useful tool for both day and swing traders. They help traders identify resistance and support levels, and can also be used as risk management strategies. If used correctly, these levels can provide the necessary information for traders to identify entry and exit points and stop losses.
Until new systemic risks emerge to drive gold higher
There is a lot of noise in the financial markets these days. While the S&P 500 has remained largely stagnant, the gold price has been on a downward trajectory. The Fed has been a bit more aggressive in raising interest rates, but this isn’t necessarily a bad thing.
The best part is that there are many ways to hedge against inflation. Aside from traditional investments like government debt, physical gold can act as a smart money hedge. It also has a long history of paying off, so you can sleep at night knowing that your savings are safe.
In fact, it’s a good idea to stock up on gold as soon as possible. This is especially important in case of an emergency. However, the gold jubilee is unlikely to materialize in the near term.
Although the Fed has been a little more accommodative, it’s still not likely to see a rate cut this year. Meanwhile, the UK has a government plan that involves an impressive amount of borrowing. That and a slew of government related scandals have sent the pound down the drain.
As for the gold price, it isn’t likely to rise much above the current level. Until and unless new systemic risks come to the fore, the gold price is likely to remain unchanged.