(Gold) Resistance is Futile

Markets have an abiding memory.  Although most investors don’t have the foggiest notion of technical indicators in an investment, they have an uncanny sense of a bargain – especially when it comes to physical gold.

The recent buzz in financial circles has been about gold’s flirtation with a twelve-hundred-dollar-per-ounce resistance. Although lay investors can’t necessarily articulate what “resistance” means in technical parlance, they somehow felt egged on by gold the minute its price surpassed that milestone early in February.

To understand what resistance means in a commodity or stock, think of police attempting to break down a door during a bust.  When the door doesn’t budge at first, they backpedal to gain momentum before having another go.  In the case of gold, a surge in the number of buyers is what it took to push past the twelve-hundred-dollar-per-ounce resistance.

As reported in the Telegraph, momentum in the form of gold fever has been building since the beginning of the month.  Michael Cooper of ATS Bullion, a London-based dealer that sells exclusively to a UK clientele, reports, “It’s been crazy – it’s been the best week since 2012. We’ve had people queuing round the block ….”

As of the 11^th, ATS had sold four thousand gold coins and bars in February, a forty percent rise over the same period last year.  UK purchasers of physical gold are reacting to the contraction of the global economy, the precipitous drop in oil prices and the fact that central banks are expanding their gold reserves to become less reliant on the U.S. dollar.

Alistair Hewitt, head of market intelligence at the World Gold Council, anticipates this acceleration of demand will only increase as the global economy plummets:

“People, and especially institutional investors are becoming more concerned about the threat of a global recession and how that could affect the banking system….[L]ots of people believe 2016 is going to be more volatile than last year … especially with the uncertainty surrounding the US elections … Gold has always been an attractive asset to buy in uncertain times.”

While predictions of recession have been dogging us since last year, clearly the panic is gaining momentum. If you’ve been waiting for gold to reach a certain price to enter the market, you’re in the process of getting scooped by individual investors and central banks (and the nations on whose behalf they’re buying) who see the monetary situation headed downhill fast.  As the Telegraph also reported, Russia added sixty tonnes to its stockpile in just the last quarter of 2015, bringing their total to over 200 tonnes that we know of.

Gold’s long-predicted rise is taking hold as world markets are tanking, and the fallout from the oil crash hasn’t even happened yet. It’s hard to know exactly what gold will do tomorrow.  But you can get close to a perfect price if you layer your purchases of gold coins as the price climbs.  As more and more experts predict coming global recession, the time to act is here.