Gold rallied as high as $882 yesterday, but has pulled back to around $870 in Asian trading this morning. A quick look at the chart paints a challenging picture for gold investors:
“Those of us holding out for gold to mount another attack at $1,000 before the summer are none the better for it today,” says our gold adviser Ed Bugos. “The credibility of this short-term thesis is growing tired. The gold market has discounted a dollar bounce and commodity correction -- it has been worried about these things long enough and has already moved on them.
“The medium-term gold price outlook hinges on evidence of low inflation and returning growth in the U.S. However, it is not clear how the Fed's current policy might bring about a halt in those price pressures building up in the production pipeline.
“The most likely case is that consumer price inflation accelerates around the world, eventually forcing a round of interest rate hikes, while cost inflation continues to shrink margins in the production pipeline. “When that happens, the price of gold will sharply rise.”
“Those of us holding out for gold to mount another attack at $1,000 before the summer are none the better for it today,” says our gold adviser Ed Bugos. “The credibility of this short-term thesis is growing tired. The gold market has discounted a dollar bounce and commodity correction -- it has been worried about these things long enough and has already moved on them.
“The medium-term gold price outlook hinges on evidence of low inflation and returning growth in the U.S. However, it is not clear how the Fed's current policy might bring about a halt in those price pressures building up in the production pipeline.
“The most likely case is that consumer price inflation accelerates around the world, eventually forcing a round of interest rate hikes, while cost inflation continues to shrink margins in the production pipeline. “When that happens, the price of gold will sharply rise.”
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