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What Is It Going To Take?

Kitco News

(Kitco News) - That is the question many frustrated investors are asking themselves as the yellow metal is seeing only modest buying pressure as half of the world’s economy teeters on the brink of a currency crisis.

Although reaction has been relatively small in the gold market, some analysts are expecting the metal’s safe-haven appeal to pick up as the world grapples with Turkey’s growing currency crisis. Loose monetary and government fiscal policies have boosted the nation’s economy but they have also created a significant risk for the lira. Friday saw the lira hit historic lows against the U.S. dollar. At one point, 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 performing currency out there. Bitcoin still holds that title, but that is probably not much consolation.

This isn’t just a Turkey story either. Three European banks have been identified as having significant exposure to Turkey: Spanish Bank, BBVA, Italian Bank Unicredit and French Bank BNP Paribas. There is growing concern that Turkey’s problems could spill into Europe, which would be a significant drag on the region’s economy.

You can see that concern in the gold market as the precious metal rose more than 1% on the week against the euro. At least some investors still see gold as a safe-haven asset. We just need American investors to pay attention.

The question is, can this latest crisis be the spark that ignites new buying momentum in the marketplace. Many analysts have noted that speculative positioning is at historic lows and it would not take much to spook those investors, creating a short-covering rally.

Speaking to Kitco News, Bill Baruch said that it wouldn’t take much to drive prices 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 one morning and gold will be $20 higher,” he said.

Kitco’s Peter Hug said that although the technicals remain bearish for gold, he is starting to get a little bullish. He added that he still needs to see more capitulation in the market before he calls a bottom.

“I am looking for people, in essence, to throw the baby out with the bath water,” he said. “I would like to see a washout in this market with a fundamental 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 next week to find out; until then, rest up and enjoy the summer.

See you next week!

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.