JM Bullion Weekly Market Review (8/14/15)
Posted on August 14, 2015
Gold saw some slight weakness in today’s session as some traders elect to book profits at current levels. Gold had a good week, however, as the market was able to stem the bleeding — at least for now — and put some upside together.
Sentiment surrounding the gold market remains quite bearish, however, that sentiment could see the beginnings of change if the market can exhibit more upside follow through. While the gold bears cite numerous reasons for their bearish outlooks on gold, we feel it may be worthwhile to also discuss some of the positives we see at current levels, below:
- Stocks are looking weak. Volatility has been increasing in global equity markets and a top in stocks could potentially be in place. Further downside in global equities may force investors to look for alternatives. Gold could stand to potentially benefit in such case.
- The Chinese economy looks weaker, as well. Although Beijing has been aggressive with measures intended to support its economy and its stock market, many are now wondering if it will be enough. A more downbeat economic outlook could also potentially fuel risk aversion and investor’s desire for gold and precious metals.
- Gold production has been cut. Gold miners have been scaling back in the face of weaker gold prices. These production cuts will bring the forces of supply and demand back into equilibrium. Less gold with solid or stronger demand may equal higher prices.
- Interest rates may rise, but they will likely rise very slowly. Although the Federal Reserve intends to raise interest rates by 25 basis points this year — and as soon as next month possibly — any further increases may be far down the road. The economy is simply not strong enough for further hikes at this point, and perhaps gold was oversold on overly aggressive rate hike expectations.
- From a technical standpoint, the picture seems to be improving. The selling appears to have exhausted itself and with demand remaining robust higher prices could be in the cards.
Of course, there are a number of wildcards involved that could make or break markets. Many signs are now pointing to higher gold, however.
We see this as simply a resumption of the long-term uptrend in gold and feel now is a great time to add to existing holdings or to begin accumulating gold. If stocks have in fact found a top, we would expect that gold could see a sudden and severe rise in price, especially as the large short position is squeezed out of the market.
All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.