Gold Price In Euro Breaks Out, Pierces €1000

The price of gold is showing encouraging signs. A basing pattern, which has been in the making for a year and a half, seems to be fully intact, contrary to the doomsday prophecies of mainstream media which predicted $800 gold.

Most investors are used to look at gold in U.S. Dollars. Looking at gold in Euro, however, the picture becomes even much more constructive, at least for gold. Obviously, when gold goes up, it mirrors fears or inflation or both, which is not very constructive from a social point of view.

The Euro gold chart for 2013 and 2014 shows the breakdown of early 2013, followed by a stabilization period. That could be coming to an end as of this week. As the chart below shows, Euro gold is attempting to break above the long term resistance line, marked in red, which goes back almost a year and a half.

One day does not make a market. Confirmation of the breakout is required. The gold price should stay above €1000 for at least a couple of days. When it comes down, it should find support around that price level before going higher. When resistance becomes support, it usually means that a breakout has been confirmed.

Another encouraging sign is that price has attempted to break through the resistance line five times since the summer of 2013. It means that “energy” has been building up, just like a pressure cooker, making a stronger case for a breakout.

gold_price_euro_6_January_2015

It is no coincidence that Euro gold is attempting to break out. On the one hand, the European currency has been decimated since last summer, collapsing from 1.40 to the U.S. Dollar to 1.18 today. On the other hand, the Grexit scenario is becoming more plausible than ever. Below is a quote from GoldCore:

With Greeks going to the polls to elect a new government in just over two weeks, concerns over a potential Greek exit or ‘Grexit’ from the euro is growing and this has led to the euro falling against the dollar and particularly gold.

Over the weekend Germany’s Der Spiegel reported Angela Merkel’s view that Germany would be “comfortable” with a Greek exit and that “any fallout would be manageable.” That the Chancellor felt the need to make such comments is been seen by some as an attempt to scare the Greek people away from voting for anti-austerity group Syriza.

Syriza’s leader, Alexis Tsipras has already indicated that it is not his intention to pull Greece out of the Euro-zone but to renegotiate certain aspects of the bailout agreements with the Troika, particularly those seen as an unjust debt burden placed on average Greek citizens.

The coming weeks and months will be tough for Europe. The Greek elections are planned for end of January. The weeks and months after the elections it will become clear whether the program from the Greek political party Syriza will be acceptable for the EU. If not, then the European Union, along with the currency, will be facing a very hard time. That will undoubtedly be reflected in Euro gold.

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