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Having staged a mini-recovery, gold looks set to retest the $1200 level. The major catalyst for this has been the strengthening of the US dollar following the release of today’s US economic data. The expected non-farm payrolls figure was expected to be up 163,000 but came in considerably better at 190,000. This does go some way to confirming the improving sentiment that has been coming out of the US, and will no doubt give the Federal Reserve a little more encouragement that they are getting closer to being able to start reducing the QE process.
All of this adds to an improving equity picture and, to an extent, reduces the fear levels that have helped drive safe haven investors towards gold. In other asset classes that had seen their price beaten so much over the last year, one would have been likely to see a reduction in long positions. Gold however is not just any commodity, and retains a very loyal base of investors who are not easily shaken from their convictions. Currently IG clients are 70% long of the precious metal and have been solidly long for the duration of its fall. The problem that has arisen is that there is not a fresh trench of investors to help move it higher.