Finally gold investors began to feel a state of nervousness. After starting the yellow metal in the trip a decade-long rise, returned this week fell to its lowest level since July last year, down more than $ 300 from a record of more than $ 1,900 per ounce in 2011.
The cause pledged Mario Draghi, President of the European Central Bank, to do” whatever it takes” to protect the euro undermine the precious metals over the past year.
Because the mood among investors continued to improve during 2013, a gold dealers in mind something else, is the possibility that eliminates the global economic recovery need to the role of the central bank, which boosted the recent rise in metal.
Gold was at 1579 dollars yesterday, after touching a low of $ 1554.49 in early trading
Says Daniel Pripnar, head of metals research at Deutsche Bank:” If we are now looking for sustainable position in the United States without super adapt monetary policy, it is certain that the role of gold in doubt from the structural perspective”.
He adds:” If this is the case, it is possible to say that the long-term course in the gold market during the period from 2001 to the present, it is very likely that up to a turning point”.
On the surface, there are a lot of reasons for nervous about the prospects for gold. Global stocks have risen strongly this year, and the flow of funds data shows that investors have begun to rotate assets which are considered havens in high-risk areas in the markets. Specifically, this is bad news for gold, which unlike bonds, do not provide any benefit.
He noted the minutes of the meetings of the Fed on monetary policy, which was released on Wednesday, a rise in asset prices, and suggested to calm the U.S. central bank’s appetite for open-ended asset purchases.
During the financial crisis followed by the performance of gold rise in the budget of the Federal Reserve Bank. And the possibility of the central bank early exit from emergency measures to pay gold to its lowest level in nine months.
In recent weeks, also strengthen the dollar at the expense of gold, which is priced in the U.S. currency.
He says John Bergthel, metals and mining analyst at Citigroup:” For many years gold benefited from the role as a guarantor against systemic risk, and has benefited from its relationship negative against the dollar”.
He adds:” no longer any of these factors is an advantage, so for the first time since the period we have to look at supply and demand and the right to ask about the extent to which can be up to him decline”.
Given the behavior of investors recently, there are other reasons for concern about the strength of the recent rise in prices. Valhmas of gold during the financial crisis coincided with the growing use of ETFs to get easy access to asset categories and criteria.
As a result, have been retained by more than two thousand tons of gold in the form of ingots with ETFs, and mainly by investors who have used the funds to hedge against inflation.
And says Bergthel:” This is the first time that forced the asset class of commodities to consider the accounts of this kind”. He adds:” There is a possibility that is flooding the market with metal if investors came out of those funds”.
But the source of physical demand for gold can be changed simply. The Government of India, which is one of the largest sources of demand for gold in the world, trying to stifle the demand to reduce the growing deficit in the current account. But demand in emerging markets in general remained strong during the financial crisis.
While the Chinese economy matures and more middle class consumption of luxury goods, is expected to increase the demand for gold in the country.
Also emerged as central banks in emerging markets buyer of gold dramatically in recent years as a way to hedge against the risk of inflation, which undermined the value of the dollar in reserves.
As Pripnar says” in the margin was the western financial investor is the most important contributor to the demand for gold in recent years, but this is now changing. ‘
For many investors, premature to say the end of the gold rally. The optimists based weakness of the global economic recovery and the prospects for the central banks are not, especially the Federal Reserve, able to resist further monetary easing.
And says Pripnar:” We have seen in the past that if there is any pass for any of the indicators that improved, the Fed remains there, which would be good for gold. ‘
Supporters argue others alloys that a large outflow of investment funds traded material is unlikely. With interest rates at historic lows, yet there are few signs so far to change the course of major central banks, the opportunity cost of holding gold for cash remains low.
Jake says Greenberg, a metals and mining analyst at” Jefferies”:” until we see higher interest rates (…) investors will not feel that they are forced to sell their properties of gold is low, so we believe that the price of gold should recover from levels Current this year”.
