Friday, December 20, 2013

Will the price of gold continue to drop in 2014?

Last year around this time, gold was about $450 an ounce more expensive. Back then, it was even speculated that gold was heading towards the $2,000 mark, but instead the downward slope began the following month in January. It tumbled from almost $1,700 an ounce all the way down to around $1,200 today. The last time it traded around this price level was in July 2010, so more than 3 years ago! Will gold prices continue to drop next year? There are certainly key factors in play that this could be very well possible. I've never been a commodity trader really, but this is an opportunity not to be missed!
First of all, the US dollar is strengthening and probably will continue to do so in the next year now that the Fed is tapering, which brings me to my second point, the US and world economy is improving - risk appetite is back and therefore 'safe havens' such as gold are becoming less important. Third, the gold production is expected to increase - and so is the mining production costs which makes gold much less profitable, of course this affects the price of gold.

Now, from a technical standpoint it is a 'Strong Sell' all across the board, no matter which chart you pull up. This doesn't happen very often. Usually a chart with a different time frame will also have a different signal like 'neutral' or 'buy'.
For me it's enough evidence to be bearish on gold this upcoming year, expecting to see prices well below $1,000 an ounce. Also, gold doesn't seem to be able to find any support.

If I were a gold producer, I would be pretty worried right now and wonder how this will affect my bottom line. Now the 'support' level is $1,200, but gold now even broke through that psychological level. Are we indeed heading to $1,000 and lower? We'll see. I entered a short at $1,200, which was my conformation level that the ride down is far from over. My target? $1,000.

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