Analyst Calls ECB Stimulus Catalyst For Gold Breakout

  • Posted Wednesday, June 11, 2014 at 08:45 PM

TANGIBLE INVESTMENTS - Los Angeles - by James O'Dell - Gold was steady on Wednesday, gaining a modest 0.04 percent to $1,260.60 an ounce on short covering while Silver rose one cent to $19.22 an ounce as the dollar weakened. “The dollar is down a little bit and gold is up a little bit,” said Frank Lesh, of FuturePath Trading. “It (Gold) is trading inversely to the buck at the moment," added Lesh.
 
“We haven’t dipped, so we’ve got some short-term buyers here looking to take the market up to some resistance areas....Maybe Platinum/Palladium strength is holding Gold up too a little bit this week.” Platinum was up 0.2 percent at $1,476.20 an ounce, and Palladium hit its highest since Feb. 2001, at $862.50 an ounce.
 
Meanwhile, in a research report released on Tuesday, Colin Cieszynski, of CMC Markets, says the announcement last week of the fresh stimulus package launched by the European Central Bank (ECB) could be the catalyst the gold market needs to boost prices. The ECB cut interest rates, announced a new 400 billion euro LTRO program, ended sterilization, and hinted at the introduction of a Fed-like quantitative easing (QE) program.
 
Cieszynski says that Gold’s rally immediately following the ECB policy statement “may have signaled a major turning point for the yellow metal after nearly three years of declines.” He says that Gold's reaction demonstrates that the precious metal may be more closely correlated to the ECB's balance sheet than to the Fed's.
 
Cieszynski says that “If Gold continues to follow its recent trend of tracking the size of the ECB balance sheet, it could potentially stage a 56 percent retracement of its losses over the last few years in the coming months."  Cieszynski concluded that "A 50 percent to 62 percent retracement of the previous downtrend suggests the $1,555 to $1,640 zone could potentially be probed.”
 
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Metal BID ASK CHG$ CHG%
Gold 1252.80 1253.50 $5.80 0.47%
Silver 17.65 17.69 $0.22 1.26%
Platinum 1284.50 1287.50 $14.75 1.16%
Palladium 773.50 776.50 $11.80 1.54%
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