Gold Set To Test $1300 An Ounce
Los Angeles CA, (Tangible Investments) - by James O’Dell - The price of Gold dipped modestly on Monday after rallying sharply on Friday and advancing $19.50 or 1.55 percent to finish the week with a second straight weekly gain at $1,279.10 an ounce, while the price of Silver jumped $0.86 or a whopping 5.07 percent to end the week at $17.81 an ounce, as the Gold/Silver ratio fell to 71.82.
The week began with Oil prices plummeting after Goldman Sachs slashed its prospects for West Texas Intermediate (WTI) crude oil, expecting it to average just $50.40 a barrel this year, down from their earlier prediction of $83.75 a barrel. The firm dropped their expectations for Brent crude as well, calling for an average of just $70 a barrel, down from an earlier prediction of $90 a barrel.
Goldman's actions followed a statement by Saudi Prince Alwaleed bin Talal that blamed both a supply glut and weak demand for crude oils' current weakness while adding, “I’m sure we’re never going to see $100 anymore.” The rapid 50 percent+ fall in crude oil prices is most troubling. “Anyone who says they anticipated this 50 percent drop (in price) is not saying the truth,” said bin Talal.
“There is an element of beginning-of-the-year exuberance in Gold, carrying over from the relative weakness in the equity markets at the moment,” said Mitsubishi analyst Jonathan Butler. In the meantime, ETF Securities reported on Tuesday, that the resilience in the Gold price so far this year, may stem from the fact that the yellow metal has found a bottom.
“The short-term direction of Gold is being driven by the dollar, oil and general risk sentiment in the market,” said Zou Lihu, of Citics Futures Co. in Shenzhen. "It's no surprise that Gold appears robust," said Commerzbank's Daniel Briesemann on Wednesday.
"It is living up to its reputation as a safe haven as other cyclical commodities are tumbling, equity markets are down, and we are seeing higher risk aversion almost everywhere. This afternoon it's also clearly due to the weaker retail sales figures that Gold is up," and "That has led to a weaker dollar."
Meanwhile, the World Bank cut its outlook for global growth, with the added warning that the world economy remains overly reliant on the strength of the U.S. recovery. “The global economy is running on a single engine,” said World Bank chief economist Kaushik Basu.
“It is only the US economy that is forging ahead in a global economy with so much uncertainty. We need several engines.” Following the gains this week in the Gold market, TD Securities now sees an opportunity for Gold to test the $1,300 an ounce level, in the coming weeks. “Yesterday’s close above the 200-day moving average (cash $1253.30) was clearly a bullish technical signal,” said TDS.
The bank went on to say that the damage done in Swiss equity markets, after the Thursday announcement by the Swiss National Bank (SNB), may have turned out differently had Swiss voters chosen during the Swiss Gold Referendum held in November, to increase their Gold reserves.
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