mineweb.com / By Lawrence Williams / February 21, 2013
Perhaps we were a little premature a week or so ago in suggesting that the gold price was due for a strong upturn following a period of consolidation – see Consolidation over? Is gold at the turning point?. In a way the title was correct, except that the price turned downwards rather than upwards – and sharply so!
But even so we do feel that the future for the gold price is to continue rising overall. The latest downturn isn’t a case of a bubble bursting, but short term sentiment seems to have been moving against the precious metals and consequently buying pressure isn’t coming in to the same extent for now. The bears are tasting blood and weighing in with selling pressure and there could be other forces at work too. It may not take much to reverse the current weakness, but those who follow the charts (admittedly often finding interpretations at odds with one another) are mostly looking for further weakness before a serious recovery kicks in.
On the face of things, virtually all the factors which have driven gold throughout its bull run are still in place. Indeed most of them are stronger today than they have ever been in the past. The major economies are still undertaking monetary easing programmes thus debasing their currencies, physical demand for gold is continuing to rise in many parts of the world, mine production remains flat, central banks are still buying rather than selling, many of the world’s major economies remain mired in recession, or in zero or low growth situations. Gold backed exchange traded products (ETPs) may have slipped a little but remain near all time highs. What has happened?
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