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  • Gold: Various fundamental and technical catalysts could thwart bulls



    By icn.com

    Precious-Gold resumed its drop for a fourth straight week, despite the surprising delay by the Fed to its stimulus taper last week, amid hopes there will be reduction in the Fed’s bond purchases before the end of this year.

    Still, the yellow metal is unable to rebound from its downside trend that began since October 2012 after the breach of the key upside channel that took the metal to a 12-year rally, hitting its all-time high at $1920.92 an ounce in September 2011.

    Gold managed to gain some ground last month on political risks stemming from a possible U.S. strike on Syria, yet worries have faded after the U.S. reached a deal with Russia to put Syria’ chemical weapons under international control.

    This year will probably be the first year of downside correction, as it seems difficult to end this year above 2012’s closing of $1676.91 since it has lost most the factors that contributed to its previous rally.

    Gold has lost, so far, more than 18 percent this year, where it entered a bearish market in April as the progress in U.S. data raised expectations the Fed would scale back its non-standard measures before the end of this year, thereby reducing the appeal of the metal as a hedge against inflation.

    Although the Fed defied analysts’ expectations last week by refraining from cutting economic stimulus, illustrating that tapering stimulus is “not on a preset course” and will depend on the progress in economic growth, still there are hopes that further progress in coming U.S. figures would prompt policymakers to start withdrawing its monthly bond purchases.

    Hence, in the coming period the main focus will remain on U.S. data, most notably September’s non-farm payrolls that will provide an update about the status of the labor market.

    Investors’ attention to remain on equities that climbed to multi-year highs on progress in economic data in major economies on the one hand and the improvement in companies earnings on the other.

    Prices will hover around $1,300 in three months and retreat further to $1,175 in a year, as the U.S. economy strengthens and the Fed slows stimulus, Goldman said in a report this month.

    Overall, the shiny metal is predicted to remain weak as the progress in global economic data will remain to dent the metal’s attraction as a safe haven. Expectations of seeing a stimulus withdrawal by the Fed before the end of this year will lower gold’s shine as an inflation hedge.


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