What Is It Going To Take?
(Kitco News) - That is the question many frustratedinvestors are asking themselves as the yellow metal is seeing only modestbuying pressure as half of the world’s economy teeters on the brink of acurrency crisis.
Although reaction has been relatively small in the gold market, some analysts are expecting the metal’ssafe-haven appeal to pick up as the world grapples with Turkey’s growingcurrency crisis. Loose monetary and government fiscal policies haveboosted the nation’s economy but they have also created a significant risk forthe lira. Friday saw the lira hit historic lows against the U.S. dollar. At onepoint, the U.S. dollar was up 24% against Turkey’s currency.
The one bright side for the lira is that it is not the worst performingcurrency out there. Bitcoin still holds that title, but that is probably notmuch consolation.
This isn’t just a Turkey story either. Three European banks have beenidentified as having significant exposure to Turkey: Spanish Bank, BBVA,Italian Bank Unicredit and French Bank BNP Paribas. There is growing concernthat Turkey’s problems could spill into Europe, which would be a significantdrag on the region’s economy.
You can see that concern in the gold market as the precious metal rose morethan 1% on the week against the euro. At least some investors still see gold asa safe-haven asset. We just need American investors to pay attention.
The question is, can this latest crisis be the spark that ignites new buyingmomentum in the marketplace. Many analysts have noted that speculativepositioning is at historic lows and it would not take much to spook thoseinvestors, creating a short-covering rally.
Speaking to Kitco News, Bill Baruch said that it wouldn’t take much to driveprices above $1,250 an ounce, which is why he sees value at current levels.“You want to own it now because with all this uncertainty we could wake up onemorning and gold will be $20 higher,” he said.
Kitco’s Peter Hug said that although the technicals remain bearish for gold, heis starting to get a little bullish. He added that he still needs to see morecapitulation in the market before he calls a bottom.
“I am looking for people, in essence, to throw the baby out with the bathwater,” he said. “I would like to see a washout in this market with afundamental reason...We are not quite there yet.”
So are we on the cusp of a trend shift in gold? We will have to wait until nextweek to find out; until then, rest up and enjoy the summer.
See you next week!
By Kitco NewsFor Kitco News
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