GOLD FUNDAMENTAL ANALYSIS LONG TERMWhy GOLD is bearish
A number of factors are driving investors out of riskier assets and into the traditional safe-havens – Treasury notes, Japanese Yen and U.S. Dollar. Gold is benefiting from the drop in yields but also from the plunge in the global equity markets.
Stock traders essentially need some place to park their profits so gold is in some ways benefitting from this. Liquidity is a major factor and gold isn’t as liquid as the three other safe-havens. Gold appears to be taking on more of a hedging role today. Traders may be buying gold as a hedge against a further decline in stocks.
The primary cause of the market turmoil on Monday is a steep drop in stocks in Hong Kong with shares of embattled Chinese developer China Evergrande Group to blame for the move. Hong Kong’s Hang Seng Index dropped 3.3% to close at 23,099.14. Shares of China Evergrande Group in the city plummeted 10.24%, after failing as much as 17% earlier.
Long Forcast
In December GOLD futures were finding support inside a key of technical area at $1757.40 to $1738.60.
Due to sell-off in the stock market and weaker Treasury yields they could offer some relief so that then can beat-up asset which was fallen nearly $100 since September 3. However, they expected that the selling could be resume once the smoke would clear.
In order to have a major rally in gold, the central banks would have to pumped more liquidity into the financial markets, but that is not likely unless there should be 5-10% correction in the stock market. Although such a move is on the central bankers hand and most were worried about withdrawing stimulus from their economies than putting liquidity back in.
A number of factors are driving investors out of riskier assets and into the traditional safe-havens – Treasury notes, Japanese Yen and U.S. Dollar. Gold is benefiting from the drop in yields but also from the plunge in the global equity markets.
Stock traders essentially need some place to park their profits so gold is in some ways benefitting from this. Liquidity is a major factor and gold isn’t as liquid as the three other safe-havens. Gold appears to be taking on more of a hedging role today. Traders may be buying gold as a hedge against a further decline in stocks.
The primary cause of the market turmoil on Monday is a steep drop in stocks in Hong Kong with shares of embattled Chinese developer China Evergrande Group to blame for the move. Hong Kong’s Hang Seng Index dropped 3.3% to close at 23,099.14. Shares of China Evergrande Group in the city plummeted 10.24%, after failing as much as 17% earlier.
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