Bloomberg is negative on Gold and they may have good reason
Today is Thursday 22nd December 2016 and we are commenting on a report published by Bloomberg on Monday which was rather pessimistic for gold.
It points out that Gold Prices have fallen for six straight weeks, the worst streak in a year, as prospects for higher U.S. borrowing costs dampened demand. Investors also appear pessimistic about the outlook for 2017. Hedge funds reduced their bets on a rally to the lowest since February, while outflows are increasing from exchange-traded funds.
After the metal’s best first half since 1979, bullion has been losing its attraction as U.S. equities rallied to record levels. A stronger dollar and rising bond yields have also restricted demand for gold.
According to John LaForge, from Wells Fargo Investment Institute:
“People are still too optimistic on gold….. We’re in a price purgatory for a lot of commodities, including gold. You’re going to have a lot of investors and strategists like myself reduce their price forecasts.”
According to the U.S. Commodity Futures Trading Commission the net-long position, or bets on price gains, for gold declined 15% to 68,905 futures and options contracts in the week ended Dec. 13. The holdings are down 61% over the five-week slump.
On the Comex in New York, gold futures added 0.3% to $1,141 an ounce on Monday, after a 2.1% loss last week. Prices touched $1,124.30 on Dec. 15, the lowest since February.
Bloomberg further adds : “Investors are positioning for more stability. In the month through Dec. 15, they pulled $6.2 billion from ETFs tracking precious metals -- the largest withdrawal across asset classes…. The biggest casualty was SPDR Gold Shares, the top fund backed by bullion. Holdings in global gold ETFs dropped for 26 straight sessions through Friday, the longest slide since 2013.”
While assets in the gold ETFs are still up for the year, Goldman Sachs Group estimates that the “vast bulk” of the holdings are losing money at current prices. If investors were to withdraw from even half of those money-losing holdings, it would spark a $60 sell-off in prices, the bank said.
The prospects from China also look less healthy.
According to the Peoples Bank of China, In November China refrained from adding to its gold reserves for the first time in six months, also Imports to India are down 43 percent in the first 11 months of the year compared with 2015, provisional ministry data compiled by Bloomberg shows.
So what does this all mean? Well for a start do not believe the pumpers that gold is about to hit $2,000; If anything its more likely to reach $1,000 than $2,000 in the next 3 – 6 months. There are too many things happening which may suppress its price and if Donald Trump does reduce taxes when he becomes President where do you think that surplus money is likely to go – yes the Stock market not gold.
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