Gold price fell $12.07, or 0.7%, to $1,630.55 per ounce

The gold price fell $12.07, or 0.7%, to $1,630.55 per ounce Monday morning amid widespread liquidation in financial markets and strength in the U.S. dollar.  Silver fared worse than the price of gold, as it dropped $0.87, or 2.8%, to $30.81 per ounce.  In doing so, the prices of gold and silver reached their lowest levels since April 4th and January 20th, respectively. 

Commenting on the gold sector’s weakness of late, analysts at UBS wrote in recent notes to clients that “Physical demand is currently underwhelming – barely even blinking when prices dipped below $1640 yesterday – and this hardly offers any assurance that gold can easily find support on any further price drops… Gold could certainly use fresh catalysts from external markets at this stage to shake it out of this stupor.”

One potential catalyst for the yellow metal that surfaced last week was from John Paulson, the billionaire hedge fund magnate whose firm – Paulson & Co. – is the largest shareholder in the SPDR Gold Trust (GLD).  Paulson told investors that he recently transferred some of his own capital out of his firm’s Credit Opportunities Fund and moved it into the Paulson Gold Fund to take advantage of the sector’s weakness.

UBS later stated in its report that “Until there is a clear sign as to whether it is taking on a safe-haven or a risk persona, investors are likely to continue keeping participation small and timelines brief.  Instead, it’s quite likely that gold will wait and take its next directional cue from the FOMC (Federal Open Market Committee) meeting next week.”

As the firm alluded to, the Federal Reserve’s next monetary policy meeting will occur on Wednesday April 25th.  There, the Ben Bernanke-led Federal Reserve is expected to maintain but not add to its current slate of accommodative policies.  However, investors will be keeping a close eye on the language and tone of the FOMC meeting for any hints on a potential third round of quantitative easing (QE3).

At last month’s Fed meeting, the central bank exhibited a less dovish stance than most investors were expecting – which helped pressure the price of gold in the days that followed.  However, several economists still expect the Fed to launch further accommodative measures by the June FOMC meeting.  One individual in this camp is Jan Hatzius, chief U.S. economist at Goldman Sachs.  Hatzius recently stated that the firm’s “baseline” scenario is that “we will see something in the second quarter” with regard to additional Fed easing.

Chairman Bernanke and his fellow central bankers are “encouraged by the improvements in the labor market they’ve seen but they want to keep them going,” the Goldman Sachs economist added.  “And they’re concerned if the economy doesn’t accelerate and GDP growth doesn’t pick up from here, that maybe we’ll see a slowdown in the pace of those gains.”

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

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad
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