Are We On The Cusp Of An Epic Gold Market Surge?
Looming Gold Market Surge?
August 2015 is going down in the record books…
As I’m sure you’re aware, equity markets just experienced some history making volatility. Investors were taken for a gut-churning roller coaster ride as the Dow Jones Industrial Average (DJIA) swung triple digits nearly every day the past two weeks.
Of course, August 24th’s 1,000 point DJIA downturn was the most shocking.
Much of the recent market uncertainty stems from China…
With the Shanghai Composite down nearly 40% from mid-June, it’s fair to say Chinese stocks are crashing. The remarkable downturn has everyone on Wall Street wondering if China’s economy is about to go in the tank.
Since it’s the world’s second largest economy, a hard landing in China would cause plenty of damage on the global scene.
Now before you sell everything and head for your backyard bunker, you must realize Chinese officials are taking massive action to avoid a crisis. In fact, the People’s Bank of China (PBOC) recently released multiple stimulus measures that will hopefully halt the downturn and restore market sanity.
Will it work?
I don’t know.
And no one on Wall Street knows either. All we can do is monitor incoming Chinese economic data to see if economic activity picks back up.
But here’s the question we really want to answer today…
Is there a looming gold market surge due to the economic events unfolding right now?
In case you’re unaware, the yellow metal is typically a flight to safety asset in times of extreme economic uncertainty. True to form, gold rallied sharply from August 6th to the 21st.
Take a look…
As you can see, gold rallied just over $70 an ounce in early August as investors fled the equity markets.
But the past week hasn’t been so kind…
Even though there was still massive equity market uncertainty the past few days, the yellow metal has fallen to $1,125 an ounce.
Judging by gold’s performance this week, it appears investors are not yet ready to fully embrace its “safe haven” status.
Can the metal trade higher in coming weeks?
It might- but I believe investors will have to witness something remarkably worrisome in the near future to make it happen.
And look at this…
Even though gold traded higher in August, the same can’t be said for its brethren- silver and palladium. In fact, both metals lost ground last month.
Silver and palladium’s ambivalent August performance further confirms ‘precious metal fever’ isn’t quite ready to catch on.
Bottom line…
Despite the remarkable happenings in the marketplace the past few weeks, gold does not appear ready for a massive upside breakout.
However, past performance does not guarantee future results. If the other shoe really drops in China in coming weeks and another market panic ensues, gold could finally see the bullish push it needs to really bring in the big money.
A technical break above $1,175, and then $1,250 an ounce, on heavy volume is the first sign I need to really get excited about big upside in gold.
How do you capitalize on gold market swings?
One of the easiest ways to capture gold market profits is through commodity ETFs. This article explains the best ways to capitalize on potential upside in the commodity.
But since the chances of additional downside in gold are still quite strong, you better keep an eye on the bearish ETFs presented here.
Until Next Time,
Justin Bennett
Commodity Trading Research
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at http://commoditytradingresearch.com/free-sign-up.
Category: Commodities
