Gold Price Steadies Despite Normally Bearish Factors

Source:

Resource Capital Research feels "there is additional upside for a major gold price breakout should the US dollar lose its current safe haven currency status, through a further decline in the US economic outlook relative to other world economies in 2009."

Australian research organisation, Resource Capital Research introduces its latest report on gold with the following statement: "The key factor for gold in recent months is not that it has not appreciated significantly, but that it has essentially held its value in a period of a strong US dollar, decreasing inflationary expectations, collapsing oil and commodity prices and aggressive hedge fund selling."

While this may be a statement of the obvious, given that all the factors quoted are normally considered adverse for the gold price, the yellow metal's resilience in the face of so many negative pointers suggests a considerable degree of underlying strength...

The organisation points also to a strong increase in investment demand for gold in terms of record quarterly movement of funds into gold ETFs and the well documented demand for coins and bars which has led to temporary shortages and delivery delays in many places. Jewellery demand has also remained strong in India and China although it has been weaker in the West...

Looking ahead RCR feels "The near term outlook for the gold price remains closely tied to investment demand from safe haven buying, which has underpinned the price in recent months and is looking increasingly strong. If gold disinvestment tails off there is potential for further price gains. There is additional upside for a major gold price breakout should the US dollar lose its current safe haven currency status, through a further decline in the US economic outlook relative to other world economies in 2009."

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