There has been little overall change in gold prices in recent weeks. Since the price was hiked over the $1300 psychological threshold following FOMC’s refusal to be more aggressive with the US economy, gold has hovered around the $1320 an ounce mark.
Although it has been a rollercoaster ride for the yellow metal, traders are not taking prices one way or another, and analysts are divided whether there will be much movement this week.
Although the Asian market has been pulling prices down in favour of equities, Wall Street are investing in gold to use it as hedge against riskier assets backed by what is looking increasingly like a weak dollar.
The equities market in the Far East has been firming up for several months and despite the China gold scandal has remained strong in the face of adversity. The Asian stock markets held a near three-year high on Monday.
Gold was further supported by strong US jobs data last week which suggests the US economy is continuing to strengthen, but Wall Street traders still have reservations about the actual strength of the US economy despite how the figures make it appear.
Analysts in the Far East however seem much more optimistic about the US economy. One economist in Sydney commented how the US economy is looking strong and has prompted the appeal in equities.
Forecasts have reset the price of gold to fall to around the $1300 an ounce price point and according to data from the Commodity Futures Trading Commission, speculators have raised net long positions to 136,929 contracts.
London gold fixing
Analysts in the West however, see a different story for gold. The London gold fix that came under scrutiny is the latest rigging scandal goes under the spotlight this week as the World Gold Council determines which organisation is best placed to take control of the age-old tradition.
A meeting hosted by the World Gold Council will take place in London this week to discuss the future of global benchmarking is expected to drive precious metal prices up ahead of the overall.
Economists have argued for years that the London gold fixing lacks transparency and their point was proven earlier this year when a former trader of Barclays admitted to price manipulation that favoured the decision-makers.
Barclays were subsequently fined $45m and regulators called for the century-old to come under review. It is expected that the new system to be put in place will allow prices to be determined by supply and demand rather than banks setting a single daily price.
The development of electronic trading means that the price of gold fluctuates much more these days than it did in the past because buying and selling is easier and the transfer of data on the sales is much quicker.
A new system for gold fixing will be much fairer, but because of the supply and demand, analysts in London believe gold prices will go up, particularly as Wall Street is using as a hedge fund.
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