Weakness in the U.S. dollar in 2010 could lead central banks to the gold trough

The gold market is expected to open flat at begin of year 2010, based on overnight Globex trade. The dollar is weaker against most foreign currencies and the energy sector is trading higher. Speculative/ investment demand for gold bullion has slowed this month with gold prices down 6.3 percent for the month and down 9.7 percent from the peak at $1227.50. This also reflected in the stats from SPDR Gold Trust as the NAV has lost 3.873 billion dollars from the peak on December 2nd, an 8.8 percent drop. Gold has not been such a formidable investment for the month of December, even though record highs were posted on December 2nd. We have been guiding investors to hedge bullion holdings and/or ETF’s this month.

Rebounds in the gold market should be limited to the $1135 – 1151 level, if gold decisively settles above 1170, short call option hedges should be covered. Expect gold to trade toward the 1055 level and possibly as low as 995 in the first quarter. The long term underlying support for the gold market is global investor demand and central bank interest. Another round of weakness in the U.S. dollar in 2010 could lead central banks to the gold trough, replacing $ foreign reserves with the yellow metal.

Many Western countries hold 60% to 80% of their reserves in gold. Eastern countries have a very low gold to total foreign reserves ratio, with many concentrated in the U.S. Dollar. The demand trends for gold should continue with many wealthy countries in the East and in South America holding under 2 percent of their reserves in gold, including China. The chart pattern for gold is currently bearish as we approach the New Year, $125 off of the December highs and no bounce. Pullbacks towards the 1050.00- 1000.00 area should attract buying. The long term upside count for gold is 1332.00.

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also waiting
Read more

Gold Price Futures (GC) Technical Analysis – Trader Reaction to Minor 50% Level at $1954.80 Sets the Tone

Image
  Gold futures closed lower on Thursday but up from its low of the session as investors battled a number of factors including U.S. economic data and outside market influences. Earlier in the session, gold fell over 1%, as positive economic data elevated hopes for a quick recovery while dampening the investment appeal of the precious metal. On Thursday, December Comex gold futures settled at $1937.40, down $11.60 or -0.60%. On the data front, a drop in U.S. jobless claims reported Thursday and positive manufacturing data reported earlier in the week are taking some shine off gold. A weaker Euro is also weighing on dollar-denominated gold by driving up thU.S. Dollar Index. U.S. weekly jobless claims fell below 1 million last week for the second time since the pandemic started, but did not signal a strong recovery in the labor market because the drop largely reflected a change in the methodology used to address seasonal fluctuations in data. Earlier in the week, a report s
Read more

India, not Trump, is the real reason behind the crash in gold prices

Image
If you have been puzzled about the crash in gold prices after Donald Trump's election, you are in the company of almost every analyst and media outlet in the western world. Gold and silver are a major part of the research at The Arora Report. A combination of our proven precious metal algorithms, extensive resources and knowledge of the emerging markets led us to alert subscribers to The Arora Report early that gold was about to crash and the reason behind it. Immediately after the election, the net position of The Arora Report in gold, silver and miners has been short as part of a sophisticated strategy.
Read more