Gold Retests Resistance, Bears Fight Upward Movements

by on November 29, 2013 5:43 pm GMT

Gold seen a little spike today but gold bears fend off a move to cross a key resistance level at $1,255. The precious metal seen movement at the eurozone consumer-price index (CPI) data came in higher than expected, core CPI printed one percent versus a .9 percent forecast. Also, India seen a surprising increase in GDP and beat the 4.6 percent forecast with a print of 4.8 percent.

Gold seen a few jumps to the $1,250 level, but the metal has yet to keep those spikes. Consequently, the once regarded safe haven fell 5.2 percent this month.

Bulls are now turning neutral, if not bearish, as the continue to get clobbered. Hedge fund manager John Paulson said he would not personally invest in gold again this year, his gold fund, PRF, is down 63 percent in 2013. John Stephenson, First Asset Investment Management Inc., said “you don’t need it as a safe haven.” Stephenson pointed out the obvious, “the view on Wall Street is that the world is getting better.” And it is likely this will continue throughout mid-2014 as the Federal Reserve hints at a potential taper.

To further support this, the MSCI All-Country World Index of Equities gained 19 percent this year, whereas gold bullion fell 25 percent this year. However, gold’s future is dependent upon whether or not equities can increase without causing another bubble-meltdown scenario.

Physical demand has yet to be seen in gold’s price as China’s net imports in gold increased 129.9 tons in October alone. The Chinese consumer demand also increased 30 percent, according to the World Gold Council. However, this is not represented in the spot markets.

Some analysts see gold as oversold, but as long as large institutions are bearish on the metal, the downturn will continue. An oversold condition can be seen as a trading opportunity. Notwithstanding, traders and investors do not buy and hold gold on oversold conditions when the fundamentals and driving forces behind gold remain bearish.