It remained no hidden secret that news headlines throughout July were largely dominated by an escalation of geo-political tensions around the globe. Usually, in such times of uncertainty investors become attracted to safe-havens, such as Gold. However, on this occasion, the valuation of Gold refused to spike. If anything, Gold consolidated during July before concluding the month slightly lower.
Investors refusal to purchase Gold recently is probably linked to an acknowledgement that the Federal Reserve are set to conclude QE within the next few months. From here, the majority of market headlines throughout the winter period will be surrounding when the US Central Bank will begin raising interest rates. If the latest FOMC statement is anything to go by, this will not occur until mid-2015. This may sound some time away but the general consensus that the health of the US economy is improving, alongside the inevitability that at some point the Federal Reserve will raise rates seems to be abundant to deter investors away from Gold.
Looking at the technicals on the Daily timeframe, Gold continues to be traded in a bearish channel although technical traders might see the consolidation in July as a potential future wedge opportunity. One of the characteristics behind the wedge pattern is that it can entice a bullish reversal. The question must be asked though that if the valuation of Gold is not spiking even with a variety of political tensions escalating around the globe, then when exactly could the valuation spike?
The most suitable answer at this stage is that investors might be tempted to look towards Gold if a major economy threatens foreign intervention to solve a political dispute, or when the US concludes QE. The reason behind the latter suggestion is that Janet Yellen could suggest after QE concludes that the Federal Reserve remain a long time away from raising rates. This could tempt a bullish rally in the commodity before the end of the year.