Forget last week's selloff, the gold price has everything going for it - RBC's Gero
In a telephone interview with Kitco News, George Gero, managing director at RBC Wealth Management, said that last week ’s selloff created a much-needed reset for the precious metal, which was on an unsustainable rally.
“The gold market has shaken out some of the hot money and now value investors are paying attention,” he said. “Gold still has everything going for it.”
Gero ’s comments come as gold prices push to within a hair's breadth of $2,000 an ounce. December gold futures last traded at $1,992.40 an ounce, up more than 2% on the day.
Gero added that while last week ’s selloff was intense, it hasn ’t changed the overall sentiment in the marketplace. He added that the selloff was technical as investors in gold-backed exchange-traded products took profits after prices pushed above $2,000 an ounce.
“ETFs are a doubled-edged sword,” he said. “Investors sold their ETFs and market makers had to sell the physical in the forward month, which is October. But October has no volume and that created the sharp selloff.”
Although October is the front month in the gold market, December has the most trading activity. Gero said that investors are trading December contracts to avoid any potential volatility around the November presidential elections.
“Looking past all the technical factors, there are still fundamental reasons for investors to hold gold and for prices to go higher,” he said.
Gero said that he remains bullish on gold as the U.S. dollar continues to struggle to find traction, even as bond yields hold near a one-month high.
“The U.S. dollar [index] pushed below 93 points this morning and that signals a bigger move on the horizon,”
The U.S. dollar index last traded at 92.8 points, down 0.25% on the day.
Along with a weak U.S. dollar, Gero said that he expects central bank stimulus measures will continue to weigh on real U.S. bond yields, another positive factor for the gold market.
“Now is not the time to bet against gold,” he said.