Last Updated : 04 April 2013 at 13:45 IST
Is it time for the yellow metal bulls, having lost their mettle (as thought by various sources), to retire? Is the 12 year bull run in gold over?
The answer depends on who you ask to...
Yesterday, US markets witnessed heavy sell-off in gold on technical grounds.
"There was no specific fundamental news event either Tuesday or Wednesday to account for the strong selling pressure in the gold market. The recent gains in the U.S. stock market, as well as generally stronger stock markets worldwide, have worked to funnel investor and trader monies away from hard assets like gold." Jim Wyckoff of Kitco News said in a note.
“See, US is making come back economically. Just go through the recent housing starts data and US automobile sales data. Both portray a robust picture of the economy.” said Vijayakumar, Chief Investment Strategist of Geojit BNP Paribas, South India.
“The day George Soros exited gold holdings in a substantive manner, it was for sure that the gold bulls would finally call it day.” he added.
When it comes to Europe, he said that “though it may take some time, Europe would recover.” And when the US economic data gets to be robust, a phase out of QE looks imminent, sooner...” he added.
This can negatively impact gold prices and in turn promote equities, he said.
“I think that the bull run in gold is over.” he said. The Bank of Japan stimulus measures may not aid gold beyond a point, he noted. “Gold is moved primarily by US and Europe data.” he pointed out.
Japan's central bank, Bank of Japan, has announced fresh stimulus measures and has pledged to meet 2% inflation target within two years. The central bank has decided to buy 7 trillion yen ($746 billion) of bonds a month. Yen, as a result crashed. The Bank would also purchase ETFs with "a view to lowering risk premia" of asset prices.
But the said measures may not help gold futures in a big way said Martin Patrick, another economist from India's Kerala State. He said the BoJ measures may create some spill over effects on gold price, but may not promote prices substantially.
“There is a lack of conclusive evidence to suggest that gold would move higher on stimulus measures. A positive correlation is lacking in the form of some perfect evidence in this regard.” he added.
“Also, I cannot conclusively say that the bull run in gold is over as economic problems still linger in US and Europe. But I would say that some kind of negativism or pessimism has taken over gold markets.” he noted.
Matrtin, however did not rule out the possibility of manipulation in gold futures. “Yesterday's sell off in gold is combination of impression and manipulation...impression that all is well with US and things are getting better in Europe.” he said.
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