Gold Bounces Upwards After Touching 8 Month Low

Gold was little changed in New York, after rising the most in almost three weeks yesterday, as investors weighed the outlook for an improving U.S. economy against signs of more buying.

Bullion reached an eight-month low of $1,208.80 an ounce two days ago as the dollar climbed to a four-year high against 10 major currencies, while speculators have raised short bets on gold to the highest level since June, U.S. government data show. The Federal Reserve increased interest-rate projections for 2015 last week, even as it maintained a pledge to keep rates low for a considerable time.

Gold rose 0.3 percent yesterday as Saudi Arabia, the United Arab Emirates, Jordan, Bahrain and Qatar all took part in the first wave of U.S.-led airstrikes against Islamic State militants in Syria. Physical buyers of the metal are returning, particularly in China, UBS AG wrote in a report today.

There may be a “corrective bounce in gold, led primarily by the high possibility of a short-covering rally and to a lesser degree by returning physical demand,” UBS said in the report, referring to closing out bets on lower prices. “Rallies will be sold. Expectations of a stronger U.S. dollar, increasing focus on Fed normalization and its exit path, the absence of inflation risks” will help cap gains, it said.

Gold for December delivery was little changed at $1,221.70 an ounce on the Comex in New York by 7:32 a.m. Gold for immediate delivery lost 0.1 percent to $1,221.63 in London, according to Bloomberg generic pricing.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza