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Three reasons gold is rising and one big warning
Gold rose to a three month high on the back of comments by the new Fed Chair, Janet Yellen. After breaking through the key resistance area of USD 1,270 /oz some days ago, it's now trading comfortably above its one hundred day moving average. But Saxo Bank's Head of Commodity Strategy, Ole Hansen, has a warning about getting too carried away.
There are three main reasons for the upswing this year, according to Ole. The main one is concern about the US economy after two consecutive months of disappointing data. He also points to demand from China, saying they've been "shrewd investors", having taken advantage of the dips we saw in 2013. A generally weaker dollar has also helped the price.
Ole says we're looking now at the 200-day moving average. If we reach that peak of USD 1,307/oz, we'd have corrected half the sell-off since October 2013. It's perfectly possible there are more gains to come.
However, beware of the dangers, says Ole. The move upwards has not been "explosive" and we were expecting some technical buying to kick in. If it falls back to USD 1,270, there could be a lot of "disappointed longs" getting out.
01:55 minutes
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