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Technical and fundamental analysis for Gold – February 2022

Published by Karl Martin Karus in category Technical & Fundamental analysis on 01.02.2022
Gold price (XAU-SEK)
18 383,49 SEK/oz
  
- 124,76 SEK
Silver price (XAG-SEK)
213,61 SEK/oz
  
- 0,59 SEK

Fundamental analysis

The economy on a global scale is still very uncertain in light of the pandemic and heightened tensions between the East and the West. Precious metals price movements could be a great indicator to analyze the current global situation.

Closed gold mines reopening

In California

The remains of Grass Valley’s Idaho-Maryland Mine, a relic from the town’s gold mining past, are about to be reopened. The mining corporation Rise Gold purchased the mine in 2017. The company has reasons to believe that reopening the mine would make financial sense.
The mine was shut down in 1956, because of economic policy, not because there were no gold left to mine. 1944 Bretton Woods Agreement had established a new international monetary system to create stability in exchange rates. As a result, the price of gold was fixed at 35 USD per ounce – gold mining became unprofitable in the US at that time.
Rise Gold mining believes that mining in the US could become profitable once again.

In Finland

Gold mines are about to reopen in our neighbor country Finland after years of dormancy. The Pampalo mine in Ilomantsi has been paused several times over the years. The last time the Pampalo mine was shut down was in 2018, but now they have reopened.
In Finland there are 4 operating gold mines today:

  • Pampola Ilomantsi
  • Laivakangas in Raahe
  • The Jokisivu mine in Huittinen
  • Suurikuusikko in Kittilä

Reopening gold mines could be a strong indicator of potential long-term spikes in gold prices. Some investors see the gold price to reach 6000 USD per ounce.

Technical indicator analysis

Trendlines / Support & Resistance

*Red lines are downtrend. The heavy red line is the long-term trendline.
*
Green lines are uptrend. The heavy green line is a long-term trendline.
*
Blue lines are short term support & resistance lines


(Picture 1. Trendlines / Support & Resistance)

  • Gold price is moving beautifully between the triangle wedge. The price has respected the triangle, which helps us identify breakout points more quickly.
  • Currently, the price is trading near 1790 USD. The price trades at the crossover of a bullish trendline and a support line. This indicates a vital support area.
  • We might see a steeper price drop and weakened bulls when the price breaks under the strong support area.
  • For bulls to gain substantial market dominance, the gold price must break out from the 1832 USD area where the bearish trendline and resistance area meet.

Moving Averages


(Picture 2. Moving Average & RSI)

  • In Picture 2. we see an unsymmetrical red line –a 250-day Moving Average.
  • The 250-day moving average is also considered a yearly moving average.
  • Why 250 days, not 364 days? It’s because on weekends markets are closed.
  • The 250-day moving average indicates a potential uptrend because the price has broken above the 250 MA line. This is usually a strong indicator of price movements.
  • The price is trading near 250-MA, which indicates a vital support area.
  • If the price breaks and closes daily candle under 250-MA, we must be aware of entering a potential bearish market.

RSI

  • RSI is currently not overbought nor oversold.
  • A divergence between RSI indicator and the price graph has emerged, suggesting a potential price spike.
  • Since the divergence appears on a neutral area, we should keep in mind that this is not as strong an indication of when the divergence occurred in the oversold/overbought area.
  • When considering trendlines, support lines, and moving averages, we see that gold price is currently trading in a very strong support area, which indicates a potential price spike.
  • When the gold price breaks down from this area, we could enter a mid-term bearish market.

Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.

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