Gold price continues to tumble
Gold prices, which had risen sharply in early going yesterday, tumbled in later trading to end the session down $15.20 (U.S.) an ounce at $948.50 in New York, bringing the total decline off last week's four-month high to $29.
And further weakness may be in the offing in the near term, unless there is another major market crisis, that is.
Martin Murenbeeld, chief economist at Dundee Wealth Management Ltd., said gold could even fall through the $900 level in the short term if no new major crisis like the Fannie Mae and Freddie Mac blow-up over the past several weeks materializes. Stocks of the two U.S. government-sponsored mortgage lenders were pummelled over concerns about their financial health.
Even if gold were to break through $900, he doesn't see it dropping below $850, which is where a technical support line comes in. And that doesn't change his longer-term view of gold. Mr. Murenbeeld still expects it will rise, which would be in keeping with the general trend this year.
Gold began the year at $833.92, and peaked at $1,032 on March 17, the day JPMorgan Chase & Co. agreed to take over troubled Bear Stearns Cos. Inc. It subsequently lost ground but started advancing again in late June, rising from $883.80 on June 4 to the four-month-high close of $977.50 on July 15.
Mr. Murenbeeld isn't the only market watcher who sees bullion rising longer term. Patricia Mohr, commodity market specialist at Bank of Nova Scotia, says there are still a lot of "people who think [gold] is going to move over $1,000 an ounce again," but she isn't necessarily sold on that idea. She believes the U.S. dollar will weaken again later this year and that could push gold up to maybe $975. She has gold averaging $935 an ounce in London this year, up from last year's average of $697.
Ron Meisels and Olaf Sztaba of Phases & Cycles Inc. are also upbeat on the sector. They said in a report last week that they believe the Philadelphia gold and silver index is on the verge of a multiyear breakout and said a decisive move above 210 on the 16-member index would signal that it will push toward significantly higher targets. The index closed yesterday at 185.04.
"One of the biggest disappointments for investors in the last few years was the mediocre behaviour of gold stocks in relation to gold itself," they said, adding that is likely to change. "A recent multiyear breakout in big-league stocks such as Barrick or Goldcorp is the first harbinger of such a change," they said. They recommend investors focus on the big-capitalization gold stocks that are leading the advance and use any pullbacks as buying opportunities. They expect attention will shift to the junior golds later in the year.
