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Gold Bullion Investor Sentiment Beginning to Shift

Commodities / Gold and Silver 2013 Jun 03, 2013 - 06:29 PM GMT

By: InvestmentContrarian


Sasha Cekerevac writes: As everyone knows, gold bullion has had a significant sell-off over the past few months. Institutional investor sentiment has shifted dramatically, as funds have booked profits on their gold bullion investments.

However, it appears that there is still some life in gold bullion, because continued strong investor sentiment in the retail sector, especially the physical market, has helped to increase demand and support the price.

Part of the reason for the sell-off in gold bullion was the better-than-expected economic data and comments by the Federal Reserve that it’s beginning to look at possibly reducing its quantitative easing program if the economy improves.

However, recent data are showing signs that the economy is not accelerating. As an example, the U.S. Department of Commerce just released the second estimate of first-quarter gross domestic product (GDP), coming in at 2.4%, slightly below previous estimates of 2.5%. (Source: U.S. Bureau of Economic Analysis web site, accessed May 30, 2013.)

While this number is not bad, it is not very strong either, and it will give investor sentiment a pause regarding the probability that the Federal Reserve will begin reducing its asset purchase program anytime soon.

All eyes will be focused on this Friday, when the all-important jobs data will be released. The Federal Reserve has two mandates: price stability, which remains in check, and employment. Investor sentiment will shift and affect assets, such as gold bullion, based on how the underlying economy is functioning.

Take a look at the chart for the prices of spot gold featured below:

Chart courtesy of

Technically, gold bullion appears to be attracting buyers. While investor sentiment dramatically shifted into negative territory with the breakdown of gold bullion below $1,550 an ounce, the latest consolidation period over the past few weeks has led to signs that much of the selling pressure has concluded.

The recent double bottom at $1,350 for gold bullion was met with higher levels of both the moving average convergence/divergence (MACD) and the relative strength index (RSI). This bullish divergence is certainly not foolproof, but it does indicate that selling momentum appears to be decreasing.

A sustained move by gold bullion above $1,400 should attract additional buyers, with $1,500 as the next test for investor sentiment. While, ultimately, the fundamentals do matter and we have to continue watching the economic data, these trigger points for gold bullion give us a roadmap of how investor sentiment is shifting among various price points.

A sustained break below $1,350 for gold bullion would most likely trigger stops by large investors, causing further selling pressure. The data do show that physical demand for gold bullion remains strong, even as many large institutional funds turned neutral or negative on gold bullion. We will have to see if there is enough demand at current price levels to absorb the supply that’s hitting the market. Additionally, the next employment data release will most likely cause significant volatility for gold bullion.


By Sasha Cekerevac, BA

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

About Author: Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. See Sasha Cekerevac Article Archives

Copyright © 2013 Investment Contrarians - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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03 Jun 13, 23:22
stock market

Stock market prices are increasing proportional to the diminishing purchasing power of the dollar. You cannot attribute real increases in value using a currency which is rapidly dropping in actual value based on the fiat Note with nothing behind the value, which diminishes to the extent of $50 billion of new notes printed monthly. Prices are going up but the intrinsic value does not increase which is mythological. Residential real estate is still actually worth only the amount of mortgage that can be carried by a wage earner based upon a monthly payment equal to one weeks wage. Everything above simply is arbitrary and simply reflect the compound inflation caused by the Fed QE over the past 10 decades. understated unemployment figures have little real relevance.

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