Market Movements

Markets react to daily news like humans react to various events daily. For instance, we greet a person warmly if we like him and give a look of grin when we dislike a person. These are very natural reactions. Markets also react in the same way. If dollar strengthens oil goes down, good earnings follows good equity market response etc. These reactions are like explaining the market movements in terms of events happened on the day. But markets are like flowing river that musters its force from the under currents it is accumulating. This under current is determined by the fundamental demand and supply factors. For instance Gold Markets. Gold was trading at under 1000 dollars but today it is looking for direction at 1150 levels.


Great Recession has brought unprecedented crisis mitigating efforts by governments around the world. In this effort, huge fiscal stimulus has been pumped into the economy. This stimulus is due to creation of money by central banks. This binge printing made investors scared of loosing value of their paper assets. Investors felt may be world is heading towards the direction of Zimbabwe. So, everybody wanted to convert their assets to physical assets and Gold satiated their appetite. So the price shift that occurred in the Gold is due to this fear of loss of asset values. This did not happen in a day. This process took place over a period of few months. Some days when dollar is rising due to Greece crisis, Gold has risen and other days when Dollar was falling due to Fed’s FOMC statements gold has fallen due to lack of demand in Asia.

Therefore, Gold price movements needs to be viewed in a much higher window and analyzed in the light of both fundamental and technical factors that are driving the price. One thing is definitely sure, in the short run focus on technical movements and long run focus on fundamental factors. This short run and long run determination is an art not science.

Have fun.