At $1,515 per ounce, the gold price traded virtually flat Monday morning

Gold followed a similar path, opening fractionally lower near $1,530, and later hitting an intra-day low of $1,511.40 before bouncing back to $1,515 per ounce. One of the catalysts for the slide in the gold price last week was a speech by Fed Chairman Bernanke. Although Dr. Bernanke expressed uneasiness over the “slow” pace of the economic recovery, he provided no signals that the Fed may implement a third round of quantitative easing, QE3. With markets addicted to monetary and fiscal stimulus, Bernanke’s unwillingness to offer a new dose of medicine to the ailing economy provided investors an excuse to sell assets of an any and all ilk, including gold.

Following Bernanke’s speech, several well respected investors and strategists– including Mohamed El-Erian at PIMCO, David Tepper of Appaloosa Management, and Jan Hatzius at Goldman Sachs – each contended that it is quite unlikely the Fed will launch QE3 in the near future. However, each acknowledged that QE3 remains a distinct possibility over the longer-term in the event that the economy worsens significantly and/or financial markets suffer steep losses.

In light of Bernanke’s comments on Friday UBS lowered its short-term gold price forecast to $1,475 from $1,500 per ounce. The firm cited the conclusion of QE2 and a seasonal slowdown as the primary factors behind its reduced estimate.

Despite its cautious near-term outlook on the price of gold, UBS raised its longer-term gold price target to $1,600 from $1,400 per ounce. “We have said for some time that we believe gold has already seen its lows for 2011,” the firm wrote in a report to clients. “This is even truer in the current macroeconomic environment.”

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

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the
Read more