Gold prices dropped sharply along with global stock markets
Friday as the dollar strengthened. Analysts cited several
technical and fundamental reasons to buy now.
Spot gold prices skidded 1.09% to $1,723.60 an ounce, a
PowerShares DB U.S.Dollar Index Bullish
), tracking the greenback against a batch of major currencies,
rose 0.35% to 21.81.
"I would look for support now at the 200-day moving average
that currently stands at about $1,668.16 an ounce (for the
December gold contract)," said Janice Dorn, co-founder of
Jtrader.us. "If it holds there, it has a good chance of resuming
Kitco's weekly gold survey found that a majority of market
participants expect prices to fall further next week. Bullion
dealers, investment banks, futures traders, money managers and
technical-chart analysts are bearish in the short term, noting
that October is seasonally the weakest month for the yellow
Guild Investment Management told clients this week that it
remains bullish on gold and bearish on the dollar because of the
Federal Reserve's quantitative easing and pledge to keep interest
rates near zero through mid-2015.
"International bond investors could again shun U.S. bonds.
This decline in the dollar's value will be accelerated as the
dollar gradually loses its status as World Reserve Currency,"
Monty Guild, the firm's founder, wrote. "If reserve currency
status is lost, the dollar will fall very rapidly and the U.S.
standard of living will fall."
Central banks in Russia, Turkey, Ukraine and the Kyrgyz
Republic bought gold in the third quarter, according to the World
Gold Council's third-quarter report released Thursday. Turkey
raised gold capital requirements for commercial banks to 30% as a
proportion of their portfolios.
The price of gold could reach $1,950 an ounce by year's end,
said Tom Winmill, portfolio manager of Midas Perpetual Portfolio
and Midas Fund .
"We expect gold to show further volatility, but rising
steadily after the election due to the political impasse arising
from the fiscal cliff," said Winmill.
In addition, "moderate consumer inflation expectations support
the Fed's easing policies. This may be long-term supportive of
gold," Winmill said.
SPDR Gold Shares (
), tracking a 10th of an ounce of bullion, fell 1.19% to 166.79
in nearly double average volume. It broke below its 50-day moving
average for the first time in two months. The ETF may be forming
a handle in a long cup base that started forming seven months
ago. It has a potential 174.17 buy point.
Market Vectors Gold Miners ETF (
) fell as much as 0.60% intraday and rebounded off its 50-day
line. It's currently ahead 0.2% at 51.63 in above-average volume.
It's formed a bullish cup-with-handle base with a potential 55.35
Trading Central, which offers trade recommendations to
institutional traders, sent out a client note to buy
Direxion Daily Gold Miners Bull 3x
) and take profits on
Direxion Daily Gold Miners Bear 3x
). These are triple-leveraged versions of GDX.
"On a relative basis against the S&P 500, the Direxion
Daily Gold Miners Bull 3x Shares is facing a key support and
looks set for a rebound," Trader Central wrote. "The ETF remains
above a strong support area set at 14.60. Also, the 50-day moving
average is rising and provides upward momentum. Finally, the RSI
(relative strength index) is supported by a rising trend line. A
further upside is expected in coming days."
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