A week in gold: ECB adds to the momentum
New York (Mar 12) Gold got its boost Thursday as investors got spooked by the measures to boost the eurozone Gold’s rise this year has surprised many and this week almost threatened to embarrass the mighty Goldman Sachs.
That the US broker has been one of the most bearish of all commentators on the metal added some ironic spice to the news that on Thursday gold came with a few dollars of busting the broker’s stop-loss position.
A stop is when an investor is taking out of a position automatically when a loss reaches a certain level.
Goldman had very publicly said it had shorted gold around the US$1,205 in February and had capped its potential loss at a 7% move the other way.
That would have been around US$1,291, and the price reached a high of US$1,288 on Thursday.
Even though it came within a whisker of having its short position in the metal closed out, the broker reiterated it expects the gold price to fall back.
US$1,100 per ounce is the short –term target after which it sees a further fall to its longer term target of $1,000.
The recent rallies won’t last it said nor will the relative stability of the markets compared to the start of the year.
Goldman’s sticking to its outlook is hardly surprising. It has been bearish for so long, the view seems entrenched.
Others disagree, Scotiabank suggested that after the recent strong momentum, gold may soon test the next technical target at US$1,307 (the January 2015 high).
Gold got its boost Thursday as investors got spooked by the measures to boost the eurozone unveiled by ECB president Mario Draghi.
If nothing else they highlighted the scale of the problem facing Europe and the few potential remedies the central bank has to turn things around.
One reason that gold did so well said traders was the dollar weakened after the ECB acted even though in theory the triple interest rate cut should have hammered the euro.
Gold and the US currency traditionally move in opposite directions, but if the era of competitive devaluation is be coming to an end, some commentators believe that will be very good news for the dollar-denominated gold price.
A couple of hours into US trading spot gold was US$1,258 or down US$18 on the week.
SOURCE: ProactiveInvestor
