Gold Market Goes Quiet – Do We Hear The Echo Of The Bottom?

Demand for gold is soaring according to the World Gold council’s latest report. The report shows that overall worldwide demand for gold rose by a very significant 33% with the US, Europe, China and Russia all stocking up and pushing demand. Central bankers, led by Russia, are stocking up aggressively.

With fundamentals like these, why are gold prices not soaring? Crowd psychology might be one reason. Sol Palha of Technical Investor explains. 

Year-on-Year Changes in Gold Demand, By Category (Source: WGC)

“Fundamentals do not drive the market; they just provide you with a picture to somewhat justify your biased views. What drives the market is emotions, and some technical indicators have the ability to pick up on these emotional changes. Crowd psychology is probably one of the best and least utilized tools when it comes to spotting topping and bottoming action”.

“From the Technical analysis perspective, gold has one more leg down, but the last leg might or might not be too steep. It will serve to bolster the foolish notion that the Gold bull is dead. Every bull market undergoes a back-breaking correction, and Gold is no exception. We believe the next leg up will yield even larger profits”.

“To indicate that a bottom is in place, Gold cannot close below 1050 on a weekly basis; failure to hold above this level should lead to a test of the 1000 ranges, with a possible overshoot to $950”.

“From the mass psychology perspective, Gold is very close to putting in a bottom. Sentiment investors, contrarian investors and investors who are familiar with the concept of mass psychology should consider taking a closer look at the precious metal’s sector now”.

Read Palha’s full analysis:  Is Gold On The Verge Of A Breakout?