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Tuesday, January 22nd, 2019 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

The Price of Gold Breaks Key Support Point

A couple of weeks ago, I gave you some key support points for the price of gold. I said that we’d see some pretty big swings between the $1,350 and $1,400 level. Indeed, gold prices have seesawed drastically.

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I also said that if the price of gold fell below $1,350 that the next major support point would be at $1,250.

Of course, we’ll see some minor support here and there, like $1,330 on the chart above. That’s where gold futures bottomed out in November 2010.

Will the price of gold fall all the way to $1,250?

The honest answer is, I don’t know. Here’s what’s happening now, though. January futures are set to expire on Thursday this week. At the same time, the value of the U.S. dollar has climbed. The U.S. dollar index jumped on Friday, and the euro fell against the dollar.

Those two things may have put a lot of downward pressure on the price of gold, forcing it through its previous support point.

Additionally, with the stock market continuing to rally in January, the price correction we called across the board for commodities still continues. Institutional investors took gains and are now looking to riskier assets.

That said, the appetite for gold may now be moving overseas, and that could increase demand, particularly as gold looks “cheap” compared to the end of 2011.

Interest in gold ETFs is picking up in places like China and India; some predict a boost of 40% in investment this year. says gold could find support between $1,325 and $1,275, which means we could have some more downside, despite the long-term bullish outlook for gold demand.

I agree with this position, particularly if we get some good economic news this week. We’ve got housing data and the State of the Union address today, FOMC decision on interest rates on Wednesday, Microsoft (MSFT) earnings on Thursday, and the GDP report on Friday.

A big week to say the least.

Gold started edging higher in Asian trading late Sunday, most likely due to the steep drop in prices since the beginning of the year.

In fact, the SPDR Gold Shares ETF (GLD) increased its holdings by 1.6%, its first rise in two weeks.

Gold mining companies will appreciate this news as the downward pressure in gold prices has also negatively affected their share prices. Take a look at Goldcorp (GG), one of my favorite gold mining companies because of low production costs and timely acquisitions.

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It appears that the downward pressure has even forced GG out of its yearlong uptrend. GG could fall as far as $36 a share, and possibly as low as $34, should weakness in gold prices continue past this week.

At that point, though, I would consider both gold and GG oversold.

Money has been flowing out of GG like rats off a burning ship. The last time money flow was this low was back in February 2010 – and GG rallied from $33.22 to $46.22 by mid-May.

At the same time, though, gold prices climbed from around $1,070 to nearly $1,250.

I don’t think we’ll see another 25% jump in gold prices over the next five months, but I expect weakness to end soon, and traditional first-quarter demand to help boost prices higher.

We’re going to keep an eye on both gold and GG this week.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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