Gold is on a slippery slope

People that are not into trading may still see gold as something of a great value, yet we, the traders, can clearly see that over the course of last 4 years gold has been dropping its value quite a lot. Even though this commodity has been on a raise earlier this year, today the price of gold is roughly $1085 per ounce, a price that was lastly seen nearly 6 years ago.

If you are an experienced trader, you may still remember August and September 2011, when the price has broken the support at $1900 per ounce, yet today the price is nearly twice as low and it is not expected to go up anytime soon. Let’s find out why.

Watch for breaks of $1000 level

Recent NFP release has caused the dollar to move down in comparison to other currencies and commodities, hence we can see a healthy increase in EUR/USD, XAUUSD and other XXXUSD rates. Nevertheless, the increase in XAUUSD price is only a temporary one and it is clear that the metal will soon break $1000 level.


What makes this level so important? Similar to EUR/USD rate, there is a certain psychological issue involved in having a price set to a certain number. While for most of the people involved in Forex trading it would be hard to comprehend that USD is now more pricy than EUR, a similar pattern would apply for the gold price being below $1000 per ounce. Usually a break of this level would result in an even higher drop due to the lost believes in the asset.

Predictions for 2016

We are certainly looking to sell gold as there is nothing expected to rocket its price. Currently the interest rates are just the lowest possible and it is nearly impossible to lower them even more. This is eventually EUR and USD interest rates will go up and this would make currency deposits a more attractive option for the investors than gold.

However, many gold mining companies would get into red when the price for an ounce gets below $1000, hence it may trigger some major changes in demand and supply.

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