“Buy This Gold Dip” As $2,000/oz Possible – Thomson Reuters GFMS
Thursday, 22 March 2012
Gold has broken below recent support at $1,640/oz and reached as low as $1,632.45/oz this morning – below its recent low and its lowest price since January 16. Gold looks like it will go lower on technical weakness and the next level of support is $1,600/oz. Below that again support is at $1,523/oz – the low seen December 29.
Gold may be supported at these levels as demand in India is expected to increase due to the 5 day closure of jewelry shops which has led to pent up demand on the sub continent.
Gold is also likely to be supported by inflation pressures. Fed Chairman Ben Bernanke said before congress that rising oil prices could lead to “short-term inflation pressures”. Retail-gasoline prices have skyrocketed 18% this year to a 10 month high of $3.864/gallon.
Higher fuel costs “act as a tax on household purchasing power and reduce consumption spending, and that also is a drag on the economy”, the Fed chief said to the House Committee on Oversight and Government Reform.
Bernake also warned that Europe must further support its banks, and warns its financial and economic situation ‘‘remains difficult,’’ even as stresses have declined.
The global economy remains on shaky ground. China’s manufacturing activity contracted for its 5th straight month, the US recovery is still very early to call, and the euro zone debt crisis may not be finished. Eurozone PMI data is due later today which will show how the economy is doing after Greece averted default earlier this month.
Thomson Reuters GFMS have said that gold at $2,000/oz is possible – possibly in late 2012 or early 2013.
Thomson Reuters GFMS Global Head of metals analytics, Philip Klapwijk, featured on Insider this morning and advised investors to “buy this gold dip”.