Gold moved sideways for the last six weeks, with each rally and correction sparking either new hopes or new fears about the yellow metal. But focusing on such short-term volatility can rarely bring any good when it comes to long-term investments. That’s one of the things that we often stress – one should always analyze the market form different perspectives and keep in mind their order of importance. This week we will focus on the long term.
Another thing, that we have already mentioned, is that such universal commodities, traded on many exchanges and in many currencies, like gold ought to be assessed taking other currencies into consideration. Hence, to get a clearer, distilled from the short-term noise picture of the situation in gold, today we will focus mostly on long- and medium-term charts, as well as on the yellow metal priced in currencies other than the U.S. dollar.
To see what awaits the gold price in February 2013 let’s turn to this week's technical part. We will start with the yellow metal’s long-term chart (charts courtesy by http://stockcharts.com.)
Little change has been seen in this chart this week, but it is important for a reason which will be touched on when we summarize this essay. The bottom was very likely formed here a few weeks ago when gold prices dipped below the 300-day moving average, which is a very important long-term technical development. Prices now appear to be simply consolidating a bit, which is also in tune with the historical patterns – the rally didn’t always start in a volatile way after the final bottom was reached below the 300-day MA – but it happened eventually many times and on each occasion the rally was worth waiting for.