Gold faces tough fight to maintain form

As gold has come ever closer to breaking the $1360 level, the pace of its ascent has continued to slow.

The current form of US economic data has implications for gold, pointing towards the Fed continuing its policy of printing US dollars. With gold being quoted in dollars, this should help sustain a longer run on the upside for the precious metal.

Few would argue that the fundamentals of this equation stack up to an optimistic outlook. However, there has been a growing disparity between what theoretically should happen and how the market actually reacts. The biggest culprit for this is paper gold, which is so often blamed by gold bugs for the malaise in the metal’s price. Of course, it is all too easy to ignore the fact that it was the ETF market that helped propel gold to its 2011 highs in the first place.

Tomorrow’s US FOMC minutes remain one of the key influences for all commodities, and gleaning an insight into the thinking on the voting board of US policymakers will give the markets a little more confidence as to the direction in which we are headed.

Gold chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.