Gold declined strongly this week following a slight rise in the week prior.
Gold was doing reasonably well until Thursday and Friday where the yellow metal tanked from around 1550 to close the week around $1500. There were a number of reasons for the strong sell – off, but the main couple were the general dollar strength and the crude oil sell – off following the IEA‘s announcement to add 60 million barrels of stocks to the market.
Some analysts reasoned that oil traders may have closed or reduced their positions in gold to cover the rising margin of their oil positions. “We are bullish on gold while the metal,holds above $1,504.” says technical analysts at bullion bank Scotia Mocatta. However they warn of further downside risks if gold falls below $1500. We are right at this level now.
Despite this, most analysts continue to predict higher prices for gold on the year. Our long term view on gold remains unchanged,” says Walter de Wet, commodities” strategist at Standard Bank. “We believe gold will continue to push higher in 2011,” he added. Despite the warning signals from China of slowing growth, demand for gold,is expected to continue to grow as a result of ongoing inflation fears. Zhang Bingnan secretary general of the China Gold Association, predicts gold investment demand to “keep doubling in the next two years”.
