Gold remains remarkably resilient

SINCE the December 2017 Federal Open Market Committee (FOMC) meeting, the price of gold has been remarkably resilient despite the US Federal Reserve hiking its funds rates by 25 basis points to 1.5 per cent. Instead of the widely expected sell-off, gold rallied 7 per cent with a similar bottoming price action pattern around the rate hike days, going back to the December 2015 rate hike.

First, let us examine the long-term trend for gold. Since August 1999, the secular uptrend was set in motion. Gold experienced a raging bull run for the following 12 years where it all came to a screeching halt in September 2011. During the bull run, gold price increased seven-fold from a low of US$253 to a high of US$1,920.

A correction of 45 per cent ensued after the US$1,920 record high was formed in 2011. Interesting, the bear market in gold ended at a significant pivotal point as well. Using the August 1999 low and September 2011 high as the projection points for referencing our Fibonacci retracement levels, it highlighted an important level at US$1,088. The US$1,088 area was the 50 per cent retracement level which in hindsight worked perfectly for halting the prolonged correction since 2011. This long-term Fibonacci retracement level has higher credibility because it has stood the test of time. The 50 per cent retracement level is also one of the more important points for anticipating reversal as the uptrend regains control.