3 reasons why gold prices could bounce by the end of the year
Gold prices could see a rally of about five per cent before the end of 2013, according to the chief executive of Compass Global Markets, Andrew Su.
Sparking to CNBC, Su said that when a market becomes overly bearish, for him, it's a clear signal to buy - and this is the current case with gold.
Su believes gold has found a floor at $1,200, which he doesn't think will break. Investors, he said, are shy to take gold below $1,200 as last time that happened, the precious metal bounced very quickly.
Gold saw a three-day winning streak in trading today - it is currently around $1,250 - boosted by weakness in the dollar.
Here are three reasons for Su's stance:
Recent weakness has provided something of a let-up for gold - anticipation of tapering in the US have fuelled sharp sell offs in the gold price over the year.
Mike van Dulken of Accendo Markets said this morning: "In commodities, Gold has benefited from the weaker dollar to get above the trendline of resistance at $1250, which may well revert to support on any weakness. From here, resistance possible at $1290."
Current weakness isn't just buoying gold: the Euro hit a six-week high against the dollar yesterday as traders re-evaluated the prospect of a taper being announced at next week's Fed meeting. And today, the dollar is edging lower against the yen on the same uncertainties.
But Su, who doesn't think the Fed will taper this December, predicts that the dollar will continue to strengthen over the next few months and that gold will follow it.
Less bullish sentiment can be better news, said Su: "When the market becomes overly bearish as it did yesterday, [we see it] as an indication to buy. There was a lot of news yesterday that hedge funds had increased their shorts to the highest level in five years and we took this opportunity to go long".
Gold will be driven higher, argued Su, by a decision not to taper. Consensus is that gold prices will remain lethargic until investors have more information on when a taper could - or will - take place.
The sell offs seen in anticipation come because cutting quantitative easing will likely push up interest rates, making non-interest bearing assets like gold less attractive to investors.
But Su believes a reignited fiscal policy debate in congress will spur a desire for safe haven buying next year, pushing prices higher.
He acknowledged that metal remains vulnerable to further falls - demand in China, crucially, is set to cool. But this slowdown will bring back some risk aversion into the markets, Su said, which will help gold recover.
In other news
Women's teams will feature on the forthcoming Fifa '16 video games - marking the first time women's football has [Read more]
Just a day after the Queen's Speech confirmed what we knew the Tories would have to do, a bill has dropped into [Read more]
Economic growth is generally considered a positive thing for the people living in that country - it brings jobs, [Read more]
Avago Technologies has sealed a $37bn acquisition of fellow semiconductor company Broadcom to create an industry [Read more]
Russian President Vladimir Putin has accused the United States of meddling in affairs beyond its jurisdiction [Read more]
The UK's GDP increased by 0.3 per cent in the first quarter of 2015, according to the latest figures from the [Read more]
Five people were arrested after the anti-austerity protest in Whitehall and Trafalgar Square turned voilent yesterday. [Read more]
Claire Perry has said “at times, the delays and disruption that are occurring are simply inexcusable.” [Read more]
Like electing a boss of Fifa whose surname isn’t Blatter or extracting an apology from Thomas Cook, reforming [Read more]
Britain's FinTech sector is a particularly bright spot in the UK’s recovering economy. Investment in London [Read more]
Currency volatility did Kingfisher no favours in the first quarter of 2015, but investors have not been put off. [Read more]
Power systems manufacturer Rolls-Royce has signed an €80m (£57m) contract with General Dynamics European Land [Read more]
Tool hire giant HSS saw its shares rise yesterday after reporting first-quarter trading in line with expectations.
Irn-Bru maker AG Barr announced yesterday that it plans to expand its state-of-the-art canning plant at Milton [Read more]
A group of Tesco shareholders seeking compensation from the supermarket claim the troubled supermarket "committed [Read more]
Yahoo will face a US class action lawsuit alleging wiretapping violations of emails sent to its users from non-Yahoo [Read more]
Your train is late again. Do you sigh, grit your teeth and try to keep smiling or mutter to yourself that you [Read more]