GOLD: TECHNICAL AND FUNDAMENTAL

Daniel Garin
Jun 27, 2016
2 min read

Gold and fundamental support behind it

Gold soared as much as 8 percent to its highest in more than two years on Friday after Britain delivered a shock vote to leave the European Union, sending investors scurrying for protection in billion and other assets perceived as lower risk.

"(Brexit) benefits gold because in a general risk-off mode, it's a natural safe haven for everybody," Marie Owens Thomsen, chief economist at Indosuez Wealth Management, said.

“It is reasonable to assume, given the expectations implied by the market pricing at present, that after a Brexit vote the pound would fall by at least 15 percent and possibly more than 20 percent.” - George Soros

James Butterfill, head of research and investment strategy at ETF Securities backed that statement up, stating at the Inside ETFS Europe conference, “Brexit would be very beneficial for shorting sterling and we will probably see a big pick up in gold. In that scenario we think gold could hit $1,400 an ounce.

Gold dealers in London reported surging demand for coins and bars among retail investors on Friday, with some saying stocks were tight.

Gold is used as instrument against inflation, deflation or currency devaluation

Gold is used as a hedge during financial crises ( when investors are turning their eyes from assets like stocks, currencies etc gold is becoming safe heaven for investors )

Technical aspect of gold

Gold is on uptrend from 2001 – primary trend is up

Gold reached it’s peek during financial crisis 2011, when it was traded above $1900 per ounce

Looking at Fibonacci Retracement we can see that corrective wave that lasted from 2011 to 2016 is finished, Fibonacci level 0.50 was verified

A Fibonacci Retracement is a term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci Retracement is the potential Retracement of a financial asset's original move in price.

EMA 100 ( exponential moving average ) was breached and then later verified on price level about $1200

There is support for this technical theory in Elliott Impulse Wave method