Does “An Institutional Player with Seriously Deep Pockets” See $1,400 this Year?
Gold’s first loss in 10 trading sessions occurred Wednesday in the wake of the newly released minutes of the Federal Reserve’s January meeting, which showed the central bank still on a stimulus-tapering course.
Nonetheless, the yellow metal was trading above its recently reclaimed 200-day moving average, a key technical indicator, and well above $1,300.
Although the Fed indicated that tapering would continue, it clearly plans to keep interest rates near record lows for some time to come, and that’s the perfect environment for gold.
“Gold will continue to find support from the easy-money policy,” Michael Gayed of Pension Partners told Bloomberg.
Gold is “battling with the complexity of faltering U.S. economic data against the backdrop of a continued Federal Reserve taper,” said Jonathan Citrin of CitrinGroup. “So far this year, gold has rallied as growth has fallen off the expected pace. … The precious metal has shaken off much of its ubiquitous pessimism from 2013 — trading this year anew with more normality in relation to growth and inflation fears.”
One sign that pessimism over gold is fading came in a report from CNBC on Tuesday suggesting that the smart money is getting back into bullion, at least on the ETF side.
“Options traders are betting big on gold,” it reported. “Three massive trades in the gold ETF executed over the past three weeks imply a belief that gold will rise by 5 to 7 percent by the end of the year.”
The details of the ETF moves “seem to indicate that the trades are being made by an institutional player with seriously deep pockets.”
“Either they're getting out of stock, or they think gold is going significantly higher,” said Brian Stutland of the Stutland Volatility Group. “But they would have to be thinking that gold’s going to $1,400 sometime soon.”
Whether gold will return to $1,400 this year remains to be seen, but with the price up about 10% so far in 2014, the prospects definitely seem brighter, with bullion’s technicals recovering and aligning with the metal’s undeniably strong long-term fundamentals.
More information can be found online at http://www.goldbullionadvisors.com
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