Global Selloff Good For Gold

Gold demand has picked up in La Jolla in recent weeks, with many old customers coming in for bullion deals. Rare coin buyers and sellers, as well, have come out as if portending of what could be a busy six months to the end of the year in precious metals.

The stock market has had some issues in recent weeks, so it is still unclear exactly what will happen there. The uncertainty is good for precious metals, but still, too early to tell.

“I still think the market is in sell-rally mode and will test lower levels once the rate hike appears to be a certainty,” said Steve Scacalossi, director of TD Securities’ Global Metals group in New York.

“However, I think it will become a huge bear trap as the pace of rate hikes will be slower than anticipated and I expect higher prices by end of year.”

People are still holding out hopes for the retail economy despite a declining dollar in the longterm.

“In terms of data, investors really want to be sure that retail sales are also good this week. They don’t want to run ahead of themselves,” ABN Amro analyst Georgette Boele said, referring to the scheduled release on Thursday of U.S. retail sales for May.

“I don’t think the fall in gold is over,” said Afshin Nabavi, head of trading at MKS. “We’re not seeing any kind of real interest on the physical front, so for me it points to an eventual breach of $1,150.”

Investors are nervous in the market.

“There is a general nervous tone to markets today that is favorable for gold,” said Bill O’Neill, a broker at Logic Advisors.

“This looks like more of a one-day rally, with the general trend of lower prices continuing,” Mr. O’Neill said.

So long as the global selloff continues things are looking good for gold.

“As a global sell off in stocks invited a ‘flight to safety bid’ to precious metals,” said Tyler Richey, an analyst for the 7:00’s Report.

“South Africa’s importance in terms of gold has been diminishing for years…Last year, the country was the world’s sixth-largest gold producer with 145 tons, which equates to 4.9% of global mining production according to the WBMS,” gold strategist wrote.

“Nonetheless, a prolonged strike could have an impact on supply and prices,” Commerzbank strategists said.