Gold A Long Term Buy But Expect Lackluster Prices In The Short Term - Analysts

(Kitco News)- Whilethe gold market may have less room to move on the downside, investors shouldn’texpect any significant rebound in the price until at least the end of the year,according to some analysts.

Thecomments come as gold prices continue to struggle to find momentum, weigheddown by a stronger U.S. dollar. August gold futures last traded at $1,256.30 anounce, down 0.26% on the day. Many analysts have voiced some disappointmentthat gold was not to hold near Monday’s nearly two-week high.

Silveris also struggling with the market in solidly negative territory. Septembersilver futures last traded at $16.095 an ounce, down 0.27% on the day.

Analystshave noted that precious metals market has struggled in the face of a strongerU.S. dollar, which has bounced off Monday’s nearly one-month low. The U.S.Dollar Index last traded at 94.2 points, up 0.14% on the day.

“Forthe moment gold is off the radar as investors continue to jump into equitymarkets, chasing short-term gains,” said George Gero, managing director at RBCWealth Management.

Geroadded that not only is the U.S. dollar benefit from hawkish monetary policy inthe U.S. but foreign investors are also buying U.S. dollars en mass to investin red-hot U.S. equities.

Whilethe gold market could see lackluster price action in the near-term as investorsignore the growing threat of a global trade war, Gero added that the marketlooks attractive in the long-term.

“Thetariffs are a short-term negative for commodities and gold because the U.S.economy has good momentum right now. But in the long run, higher tariffs willcause the economy to shrink and inflation to rise. That’s a double whammy forconsumers and that is when gold will do well,” said Gero.

DavidMadden, market analyst at CMC Markets said that it is difficult to get excitedabout gold until prices are at least above $1,284 an ounce.

“Thecharts are telling me that gold is still in a downtrend,” he said. “Even if theselling has slowed, I’m not overly optimistic that the bottom is in.”

Maddenadded that it will be difficult for gold to push higher in the near-term as theFederal Reserve continues to talk about raising interest rates two more timesthis year. He noted that the economic data also support the central bank’shawkish monetary policy outlook.

Whilethe trade wars are expected to have a long-term positive impact on gold, Maddensaid the effects won’t be felt for a while because there is so much momentum inthe U.S. economy.

“Ithink for gold to really look attractive we need to see some important economicindicators take a hit. We need to see lower consumer confidence, slowingmanufacturing output and weaker retail sales,” he said.

Theeconomic calendar is relatively light with Producer Price Index to be releasedWednesday and Consumer Price Index to be published Thursday. Madden said thatthis data might not have much impact on gold prices because there is already agrowing expectation that inflation will rise this year.

Goldis also not seeing much lift from rising oil prices, which are trading near itsrecent multi-year highs.

“Preciousmetals bulls are somewhat frustrated that the rally in crude oil marketrecently has not spilled over into much support for the metals. In years past,rallying oil prices have pulled other raw commodity markets higher,” said JimWyckoff, senior technical analyst at Kitco.com.

By Neils Christensen

For Kitco News

Follow neils_Cnchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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