Internationally, Gold prices are holding in a limited range, between $1,615 and $1,690 an ounce, and an extended move or a breakout in either direction seems tough currently. Gold seems to be consolidating now & adjust internally while the markets take a breather, preparing for the next major movement. Till now in 2012, Gold has traded below its all-time high of $1,924, recorded on September 6 -2011 and above its subsequent sharp low near $1,520 in late December 2011. In recent months Gold has been stuck in a trading range between $1,615 and $1,690, awaiting some major movement trigger in the form of external news or internal market development to push the price beyond this limited range.
Rising probability of Federal monetary easing – Sooner or later.
Perhaps the most important reason gold has not been able to move higher in recent months – the recent spate of apparently good news from theU.S.economy (improving employment, output and consumption statistics) diminishes expectations of further U.S. Federal monetary accommodation – quantitative easing (QE3). This paints a rosy picture & is driving institutional traders and speculators around the world trading in paper gold, away from buying Gold as a safe haven.
At the same time, the deepening European sovereign debt situation seems to provide a support basis for Gold & thus leading to the tight & limited range bound movements in the same in recent months.Spain, currently at the forefront could trigger similar safe haven purchases of Gold as seen last year when the Greek fiscal bailout proved to be the large momentum trigger for Gold’s dramatic rally from $1450 to the all time high till now of $1924 within a short span of less than 2 months. Though little support has been seen lately from worries regarding the European debt situation, keep a watch out for fresh upcoming developments from the European nations.
The scenario, post the November elections will be largely disappointing to those expecting a better future, due to the current politically driven dressing up of the economic statistics. It seems most unlikely that the U.S. economy can actually conjure up a healthy recovery in the face of a, yet very high unemployment rate, seemingly rising consumer spending, an extremely depressed housing sector with foreclosures yet continuing to rise, cutbacks in state and local government spending & a huge burden of private & public-sector debt. What aptly favors to the financially logically mind is that the politically motivated illusion of the dressing up of the economic statistics will not last long & sooner or later, an additional Federal monetary infusion- quantitative easing (QE3) seems to be un-avoidable. Gold may again respond with an explosive upside move as financial markets take note of the still anemic U.S. economy.