Gold may have dropped from a three-month high on Tuesday but the metal has enjoyed an almost 10 percent rally so far this year. Saxo Bank’s Ole Hansen explains that “many investors have been under-invested in gold in 2014”.

He says: “At the moment we’re seeing strong physical demand out of China which has stabilised the market and as we’ve seen some technical breaks to the upside that has triggered buyers from hedge funds and momentum traders who have to get back in. So there’s some good demand.”

In terms of levels, Ole says that what was resistance has now turned to support. So on the downside he’s looking for USD 1,303/oz and on the upside, the first level of resistance USD 1,337/oz.

Meanwhile, silver has seen the longest rally since 1968, and as Ole explains; when gold moves, silver jumps. The ratio between the two metals has broken the uptrend from April 2011 and this could potentially signal some additional silver out performance. 

Read more about Ole’s predictions here:

http://www.tradingfloor.com/traders/ole-hansen