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17 Sep 2013
Gold sees some short-term gains on dollar falls, but remains in long-term decline
FXstreet.com (London) - Gold gained some respite from its bearish trend, with prices gaining on US dollar weakness. But in the medium to long term, it is difficult to call any return to a gold bull market.
Gold broke to $1,324.40 on dollar selling ahead of the two-day FOMC meeting. But any significant gains are likely to be short lived.
The yellow metal has shed more than 20 percent this year, as increased European stability and the prospect of an easing of Federal Reserve debasement of the dollar through its quantitative easing programme drives investors out of the haven de facto currency and into riskier assets in the hunt for yield.
Gold enjoyed its huge bull run up to September 2011 highs of $1,900.30/oz thanks to aggressively loose monetary policy from central banks expanding M2 and debasing currency and investor faith. At the same time, European volatility ran wild as the Eurozone struggled with structural problems and repeated bailouts of periphery states drove investors into the perceived safety of gold.
But as global macroeconomic conditions ostensibly strengthen, investors have little reason to seek a high exposure to haven assets. With the Eurozone adapting a more stable coping mechanism for its structural problems, combined with rock bottom interest rates, risk appetite is on the rise, pushing flows out of gold and into higher-yielding assets.
And, beyond a dollar play in the price, it is increasingly unlikely that we will see a resurgence in the gold price through 2014. Central banks are on a trajectory of tightening monetary policy, with the FOMC expected to announce tomorrow that the Fed will be trimming its monthly asset purchases by $10bn.
Whether you believe in the quality of strengthening macroeconomic data driven by monetary activism or not, global markets are in a very different state than that which allowed gold such unchecked gains.
Gold broke to $1,324.40 on dollar selling ahead of the two-day FOMC meeting. But any significant gains are likely to be short lived.
The yellow metal has shed more than 20 percent this year, as increased European stability and the prospect of an easing of Federal Reserve debasement of the dollar through its quantitative easing programme drives investors out of the haven de facto currency and into riskier assets in the hunt for yield.
Gold enjoyed its huge bull run up to September 2011 highs of $1,900.30/oz thanks to aggressively loose monetary policy from central banks expanding M2 and debasing currency and investor faith. At the same time, European volatility ran wild as the Eurozone struggled with structural problems and repeated bailouts of periphery states drove investors into the perceived safety of gold.
But as global macroeconomic conditions ostensibly strengthen, investors have little reason to seek a high exposure to haven assets. With the Eurozone adapting a more stable coping mechanism for its structural problems, combined with rock bottom interest rates, risk appetite is on the rise, pushing flows out of gold and into higher-yielding assets.
And, beyond a dollar play in the price, it is increasingly unlikely that we will see a resurgence in the gold price through 2014. Central banks are on a trajectory of tightening monetary policy, with the FOMC expected to announce tomorrow that the Fed will be trimming its monthly asset purchases by $10bn.
Whether you believe in the quality of strengthening macroeconomic data driven by monetary activism or not, global markets are in a very different state than that which allowed gold such unchecked gains.