MCX Gold Has Continued To Protect 25000 Levels! Will this magic number remain intact?
Gold has lost all of its shine over past one year.
Will Gold lose its shine or Will yellow metal glitter again???
Indians love for Gold should slowly fade away. When Gold prices started falling from life time highs of 32500 levels investors and traders started buying yellow metal on minor dips.
There were systematic investments being made at each fall around 31550, 30900, 29900 but only to see it capitulate towards 25500 levels. If we have unlimited supply of resources buying on every dips can be a prudent strategy but unfortunately our resources does not allow us to increase our investments beyond one point of limit and we then become slave to the price movement and only hope for higher prices.
For us Gold is no different than any other asset class like Equity, Industrial metals, Currency or any other freely traded markets. Gold will have same faith that each of these asset classes had after exponential rise or rather secular bull trend. Gold has been in secular uptrend since the lows of 5000 in 2004 levels. The memory of investors or traders is very short and people tend to forget what has happened to equity markets in 2008 itself let alone the idea of what has happened to Gold from 1982 to 2002 when Gold gave negative real returns for more than 2 decades.
The below chart explains what has happened to Gold during 2 decades of downtrend:
The below chart shows the movement of Gold currently:
MCX Gold Continuous Daily chart:
On 16thMay 2013 we mentioned the following 2 most important lines:
“Gold has been constantly forming lower highs and lower lows which is a classical indicator of the direction of trend. It requires little explanation and justification why Gold will eventually lose its shine!”
Now Gold has come close to the magic level of 25000 which it has managed to protect since the May of last year but the entire year of sideways correction in an inflationary environment is nothing but a negative return!