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Where to now for gold? The yellow metal is struggling to hold its ground…

by , 26 September 2014

Having a small allocation of your portfolio to gold can make good investment sense.

It acts like an insurance policy against financial catastrophes. When other assets fall hard, gold tends to perform.

If you're a gold bug, you'll have watched in angst as the yellow metal continues to wallow.

So what's going on with gold? Is there any chance that it's going to recover any time soon?

Let's take a closer look…

It isn’t looking good for gold

When it comes to assets, a general rule is the more it tests a price, the less likely it is that the price will hold.

This is situation gold finds itself in. Gold has been edging nearer to $1,180 again. Last year, gold found support at this level twice.

But if it falls to this level again, there’s a chance that it won’t hold and will break lower.

Have a look at the chart of the gold price below…

Chart of gold price

If gold does go through $1,180, the next support level for gold is around $1,050. That’s its high of 2008.

How low could gold go?

This year so far, gold has traded as high as $1,392, Dominic Frisby in Money Morning UK explains. If gold falls through $1,180, and $1,050 doesn’t hold, the next big areas of support are at $850 and $730.

Many investors probably wouldn’t be that surprised if gold went down to these levels. Trends can go on for a long period of time. And gold is in a downtrend.

Gold isn’t the only metal that’s struggling. It’s a similar story for silver, platinum, copper and iron ore. Looking to broader commodities, oil is also struggling.

Commodities are battling against a downward trend. The sectors are weak. And the dollar’s strength is playing a big part in pushing them lower.

Gold needs to find a solid level of support and bounce higher. But it looks like we may be stuck in a downward trend for now.

So there you have it, what the future is looking like for gold at the moment.

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Where to now for gold? The yellow metal is struggling to hold its ground…
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