Gold Slide Slows, Few Ready to Call a Bottom Posted by Adam King on February 25, 2013
Mildly dovish comments from the Federal Reserve lent support to the gold market, though the pace of gold’s decline slowed following safe-haven demand reemergence.
U.S. gold futures for April delivery gained $18.00 to $1,591.00 per troy ounce. The spot price of gold gained $9.20 to $1,591.25 per troy ounce. Comex silver futures for May delivery gained $0.585 to $29.105 per troy ounce.
Commerzbank AG said in a note that gold lived up to its reputation as a safe haven yesterday for the first time in ages, bucking the general trend and a firmer U.S. dollar to gain in price. This morning sees the yellow precious metal continuing its recovery move and climbing to around $1,595.00 per troy ounce. The note added that in euro terms, gold has inched back up to 1,200 per troy ounce.
Prices also gained support from the President of the Federal Reserve Bank of San Francisco John Williams, who said that quantitative easing will be needed well into the second half as continued monetary accommodation is necessary to move towards the Fed’s mandate of maximum employment and price stability.
James Steel, analyst at HSBC Securities, noted these comments perhaps tempered some of the recent concerns of possible policy tightening after the release of the Federal Open Market Committee meeting minutes earlier this week. The minutes showed that some Fed members considered slowing the pace of QE.
The Federal Reserve’s policy of quantitative easing has been underpinning the gold market since the economic crises of 2008. Because inflationary concerns are inherent in QE, heightened safe haven asset demand is also an effect of QE.
Dennis Gartman, editor of the Gartman Letter, noted that following yesterday’s bounce in price the gold bug community is rising form its state of depression to a swift state of euphoria in the shortest period of time imaginable.
Major U.S. gold and gold coin dealer, Blanchard & Co., however, reckon that investors are yet again finding themselves entering a new year amid uncertainty, which will lend more support to the gold market over the medium-term. The debt ceiling, taxes, and government spending all play a role in shaping the 2013 economy.
Blanchard analysts add that current price dips present a good buying opportunity for people looking to enter the market or for adding to existing long positions, as the upside potential for strong gains is fundamentally intact.