Short Term Outlook For Gold Improving
Los Angeles CA, (Tangible Investments) - by James O’Dell - Gold continued to consolidate recent gains on Monday, after precious metals prices turned modestly lower on Friday as Gold eased $8.00 or 0.61 percent to finish the week at $1,294.30 an ounce even as the yellow metal posted its third straight weekly gain following the European Central Bank's (ECBs) launch of its bigger than expected multi-billion euro quantitative easing (QE) program. Silver dipped $0.04 or 0.22 percent to end the week at $18.31 an ounce, while the Gold/Silver ratio fell to 70.69.
The week began with Barclays announcing that it was somewhat bullish on short term Gold given the uncertainty in the marketplace. "Unexpected break above the 1238 December range highs has compelled to pare back our bearish view in the short-term as safe-haven flow signals scope for a move higher in range," said Barclays' analysts.
Monday also saw the Shanghai index fall 7.7 percent, its biggest one day drop in more than six years, after the China Securities Regulatory Commission’s announcement the previous week that three of the nations' biggest brokerage firms were suspended from extending margin accounts after violating trading regulations.
The biggest news for the week was the ECB announcement of the launch of its multi-billion euro quantitative easing (QE) program to revive the faltering euro zone economy. ECB President Mario Draghi said the bank will buy 60 billion euros a month in assets through September 2016, which is more than an earlier proposal made by the Executive Board to buy just 50 billion euros each month, according to officials.
"Gold is reacting to what Draghi has to say, to the bigger package that was announced and to rebounding inflation expectations in the euro zone," said ABN Amro's Georgette Boele. “It’s slightly higher than what the market was expecting, so we saw some buyers come in to the Gold market,” said Adam Klopfenstein, of Archer Financial Services Inc., in a telephone interview. “Investors are torn between whether to continue the flight to quality, or invest more cash into the equity market because of further injection of cheap capital.”
Meanwhile, noted investor and publisher of the Gloom Boom & Doom Report newsletter, Marc Faber, says that he is not too impressed with the aggressive easing tactics now taking place at central banks around the world, and suggests that the best way to bet against those programs is to buy Gold.
“I think people will wake up finally and say, if they can short central banks, that is the trade of the century,” said Faber, while adding. “The central banks will be exposed for all the fraud they commit.” Buy Gold, insists Faber. “My view is that when confidence in central banks finally collapses, then Gold has a 30 percent upside potential, easily, this year.”
Going forward, improving investor sentiment is evident as bullish bets on Gold futures and options (paper Gold) rose for a fourth straight week, at the same time holdings of Gold backed exchange traded funds (ETFs) have shown steady improvement.
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