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Gold In Major Correction

|Includes: SPDR Gold Trust ETF (GLD), GOLD

Gold is experiencing a significant correction and the gold stocks are in somehow worse shape. Recent data shows optimism about global growth and little immediate worry about inflation, major recent drive for gold demand. The euro gained strength and has been on the rise since early June. Gold London afternoon fix was at $1,181 an ounce.

Here is a list of fundamentals affecting the price of gold:

  1. Weak U.S. housing sentiment lowered the metal's inflation hedge appeal
  2. Main consumer-price index for June dropped 0.1%, the third straight monthly decline. The core rate, viewed as a better measure of inflationary trends, rose 0.2%.
  3. Weak U.S. July homebuilder confidence hit a 15-month low, decreased gold's appeal as an inflation hedge traders.

Liquidation of long positions is weighing on the gold price today … it is taking gold closer to closely watched technical levels, and this has potentially initiated further selling. Gold's lack of momentum has turned investors away from the metal for now. This may well continue for a while unless the (bank) stress tests results prove worrisome. said BNP Paribas analyst Anne-Laure Tremblay.

From the technical point of view, gold has broke a few important support levels recently and broke a major uptrend that we forecasted earlier in June.

Although we remain bullish on long term gold prices, we believe that the near term gold prices forecast is bearish. On July 19, 2010 seekinGold forecast for gold prices is 3 out of 10.


Gold Bearish