Gold is looking for direction as it trades at a critical technical juncture, i.e. its 200 day moving average (DMA) at $1,175.67 /oz. There is some ‘hesitation’ in gold’s price behavior, which is technical in nature, but the outcome will have fundamental implications. Why? Because this is gold’s third attempt this year to break through its 200 DMA. A successful breach would signal a confirmation that the precious metals bear market is in the process of turning into a bull market.
The key price level to watch for a confirmed trend change is $1,300 /oz which should be cleared with conviction. That would take out two prior peaks, which is the ultimate confirmation of strength!
Today could be the start of such strength, as evidenced by the strong price action of precious metals miners. Gold miners have a track record of leading the metals higher, which seems to be what the market is signaling at this point.
That was undoubtedly triggered by Mr. Draghi’s announcement this morning, in which he confirmed his intention to proceed with a loose monetary policy in the European Union. Some of Draghi’s ‘dovish’ comments included that the ECB is considering cutting the deposit rate further and his continued focus on achieving at 2% inflation rate.