The SPDR Gold Shares (NYSEArca: GLD) and other gold exchange traded products need help any way it will come, particularly after bullion notched five consecutive monthly declines through the end of August.
Some market observers believe lingering fears throughout global financial markets could be just what gold needs to bounce back.
“Resurfacing financial fears will ultimately be supportive of gold, says Reuters in a study published this month,” reports Mining.com. “The precious metal is being weighed down by the strong US dollar, and a sell-off is possible, triggered by weakened emerging markets, writes Rhona O’Connell, Head of Metals for the GFMS team at Thomson Reuters.”
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Investors have been shunning physical assets like gold in face of further interest rate tightening out of the Federal Reserve amid a robust U.S. economy. Fed Chairman Jerome Powell said earlier in August that gradual rate hikes will come, and with inflation still low, there was little concern over the economy overheating.
Recent data points suggest professional speculators have been boosting short positions in gold. Money managers are still betting on further weakness in the gold market as many have increased net-short positions to a record for a fifth straight week. Analysts at Citigroup Global Markets argued that there isn’t a lot of demand for gold in a world where yields and equities are rising.
Looking For Macro Help
Basic consumer demand is an important buffer for price falls. As a result, Alexander argued that upside potential depends on continued uncertainty and risk hedging, predicting further price upside as a result. Looking ahead, rising prices could attract fresh retail investment in price-elastic regions, but upside momentum will be driven by external tensions.
“In 2013, a substantial amount of gold was a bought by local banks in China. Gold continued to drift lower through to the end of 2015 with professional and private investors continuing to migrate from the ETFs and COMEX positions, and gold’s role as a risk-averse asset was not really in demand over that period”, O’Connell adds,” according to Mining.com.
Trade wars, hard Brexit speculation and ongoing volatility in emerging markets could be factors that boost gold as 2018 winds to a close.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.