Gold and silver prices pulled back from their six-month highs
Monday as the dollar found support at its 10-month low.
Spot gold prices fell 0.62% to $1,763 an ounce. It's risen
four months in a row, gaining 8.25% this month. Profit-taking
after a five-week winning run is in order.
"Gold is likely to have an all-time average high price this
year and next year," Jason Schenker, chief investment officer at
Prestige Asset Management in Austin, Texas. "A spike to $2,000 is
easily imaginable in the next six months, and the average price
of gold next year is likely to be between $1,750 and $2,000 per
ounce or more."
"Although QE (quantitative easing) ad infinitum with
exceptionally low rates through mid-2015 has been implemented,
the Federal Open Market Committee has also hinted that it may
implement other accommodative policies if the efficacy of current
policies is not high," Schenker said. "If the Fed announces
additional quantitative easing or other accommodative
nontraditional monetary policies, gold prices could spike even
PowerShares DB U.S.
Dollar Index Bullish (
), measuring the dollar against a basket of foreign currencies,
rose 0.29% to 21.81.
Gold Price Resistance
Gold appears to have hit key price resistance at $1,800 an
ounce and won't likely break that level until well into the
fourth quarter, Walter de Wet, a commodities analyst at Standard
Bank, wrote in a client note Monday.
"We estimate the gold at $1,770 already prices in more than
$600 billion of QE (quantitative easing) from the Fed," de Wet
wrote. "At $40 billion worth of securities purchased per month by
the Fed, this implies that the gold price, in our view, reflects
more than 15 months of stimulus already."
He believes gold prices have gone up too far too fast, noting
that physical demand for the yellow metal has slowed above $1,760
"General market consensus appears to be that the Fed could
pursue a stimulus program much longer than the next 15 months;
implying gold should go higher too," de Wet added. "We do not
disagree with this, but do think fundamentals need to catch up
with the price first."
He expects gold will find support at $1,750 to $1,725 an
ounce. He believes its fair market value is $1,740 an ounce.
SPDR Gold Shares (
), which represents roughly a 10th of an ounce of the bullion,
fell 0.67% to 170.81.
Market Vectors Gold Miners ETF (
) fell 3.21% to 53.05. It's vaulted 36% off of its 52-week low in
May.Market Vectors Junior Gold Miners ETF (
) dropped 4.4% to 24.34. It's leapt 41% from its 52-week low and
has been on a tear for three months straight. Some strategists
believe the move is bound to get tired.
"The run off the bottom in the junior gold miner ETFs is
likely to give back a third to a half of the move and spend time
building a base" said Keith Newcomb, portfolio manager at Full
Life Financial in Nashville, Tenn. "Recent momentum readings do
not confirm an investable uptrend, according to my analysis. I
wouldn't suggest chasing them."
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