Gold Outlook: Neutral with a hint of bearishness

Gold is down 37.50 Dollars on the last week. The metal lost 3.8 per cent in 48 hours between FOMC on Wednesday evening and Friday close.

The “summer hole” is arriving with the beginning of July, and the gold price seems to be very much on the upside between 1550 and 1560. It is difficult to see what could be the spark to hoist it up to new highs, according to the Head of Precious Metals at Emirates NBD, Gerhard Schubert. Perhaps, traders really have to wait for September’s traditional rally.

“Summer hole” is an expression for the northern hemisphere where traditionally investor and trading activity is quietening down during July and August. This period has repeatedly led to small losses for the gold price over the summer period, but it is not sure that this summer will be a quiet period. It seems that there are more than enough geo-political and economic worries out there to keep the gold price stable.

It is extremely difficult to try to shed a new light on the developments in Greece on a weekly basis, but the whole “summer theatre” is getting worse and worse. A survived vote of confidence gives just enough breathing space before the politicians stumble to the next vote on the austerity measures on Tuesday. All of that including protests from a – by now – absolutely alienated electorate. The population of Greece, according to the protestors outside Parliament, more and more believes that they have done nothing wrong, they paid their taxes they were asked to (open for debate) and they feel that they don’t owe anything to anybody. This does not bode well for the future and the EU, IMF and ECB are right to be cautious before sinking more EU tax money down into a black hole. The rating agencies have shown “voluntary” participation of the banking community, the “red card” and they made it clear that this would create a default event in their view.

The economic slowdown all over the world could provide further signs that gold and silver could decouple themselves from platinum and palladium. “The Gold market does feel heavy and there might be a shift of sentiment towards the downside for the week, but prices between 1450 and 1480 are buy- levels”, says Gerhard Schubert, Head of Precious Metals at Emirates NBD.

ETF levels gained some support last week and the total overall holdings in ETF’s stand now at just under 68 Mio.ounces, which represent a rise of over 300k on the week. These figures do not include last Thursday’s and Friday’s most likely redemptions.

Current support levels for gold price stand at 1500 and 1485. Resistance levels are: 1558, 1563, 1577.