Gold analysts are bullish for a third consecutive week on speculation that the first U.S. government shutdown in 17 years and a standoff over raising the country’s debt limit will spur demand for the metal as a haven.
The cost of borrowing gold held near a 4 1/2-year high in London as U.S. futures moved into backwardation this month, a signal that near-term supplies are tightening at a time when prices gained on more physical demand.
Traders stampeded out of gold, emerging markets and bonds this month, setting record monthly outflows in June. Ever since the Federal Reserve hinted that signs of a stronger economy could allow for a slowdown of stimulus, markets have protested the news.
After having once again failed at the $1,696 resistance level on Wednesday, gold prices headed lower for a third straight session this morning. In the process, the pivotal 200-day moving average price near the $1,608 level was breached by sellers.
The stock and gold markets generally rallied owing to the stimulus actions of global central banks, the expectations of a European centralized banking supervisory body and the ECB announcement of bond-purchase programs.
Gold is overreacting to bad news and ignoring good news. Calmer heads may want to focus on the good news that physical demand from Asia is improving in the case of India and exploding in the case of China.