Bears Beat Up on Bullion

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Royal Bank of Canada Capital Markets names three factors "that just might temporarily stop gold's bull-run in its tracks in a manner similar to the multi-month consolidation seen in 2004-2005 and 2006-2007": a moderation in inflation expectations; the potential for a modest counter-trend bounce in the dollar, and time now moving into a traditionally weak part of the calendar for gold bullion. This caution, however, is limited to the shorter term, with a bullish case for the longer term remaining intact.

Myles Zyblock, chief institutional strategist at Royal Bank of Canada Capital Markets (RBC CM), has joined a growing chorus of experts, such as analysts at the Bank Credit Analyst (BCA), in warning over growing headwinds for the dollar gold bullion price. This caution, however, is limited, in terms of timing, to the shorter term, with a bullish case for longer term prospects apparently remaining intact.

Close to the top of the agenda is found the global debate on whether inflation or deflation poses a bigger threat. For RBC CM, the long-term outlook for gold is appealing, "since bullion should provide an effective hedge under either scenario", something which has been "an important foundation for our optimistic leanings towards gold since 2003".

But now, RBC CM names three factors "that just might temporarily stop gold's bull-run in its tracks in a manner similar to the multi-month consolidation seen in 2004-2005 and 2006-2007": a moderation in inflation expectations; the potential for a modest counter-trend bounce in the dollar, and time now moving into a traditionally weak part of the calendar for gold bullion.

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