Gold price has been under pressure due to a stronger U.S. dollar and broad-based selling in financial markets

The gold price traded lower at $1,625 per ounce Wednesday. After breaking below $1,700 per ounce yesterday, gold prices failed to mount a rally this morning. The gold price has been under pressure due to a stronger U.S. dollar and broad-based selling in financial markets – plummeting $44.86, or 2.6%, during Monday’s session. With its decline, the spot price of gold dropped to its lowest level in seven weeks and extended its loss in December to 4.5%.

As for the gold price, Dennis Gartman – long-time commodities investor and author of The Gartman Letter – wrote on Monday that “We shall continue to reduce our exposure to gold and we had hoped to increase our exposure to equities, moving eventually to balance this position, holding equal sums of gold and equities while being short of the EUR.”

However, Gartman noted that with the recent uptrend in the euro-denominated price of gold breaking with yesterday’s sell-off, he sold his entire position in the gold. Although he acknowledged that he would consider buying back investments tied to the gold price in the future, Gartman did not provide a time frame or a particular level at which such purchases would be made.

While Gartman effectively sounded the alarm on the gold market – at least in the short-term – UBS analyst Peter Lee presented a more neutral stance. In a note to clients, Lee forecasted that the gold price is likely to stabilize in a trading range between $1,600 and $1,750 per ounce for the remainder of the year. Subsequently, Lee predicted the gold price will resume its rally. “We continue to favor gold over other commodities as geopolitical and economic uncertainties persist,” Lee wrote. “Since the prevailing primary trend is up we expect gold will resume its uptrend and retest its $1,923 all-time high.”

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 wai...
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