Market Nuggets
A slow price rebound for gold is actually more bullish in the long run: Commerzbank
(Kitco News) Gold is taking its time getting back to the highs from two weeks ago with $2,000 an ounce level acting as a strong resistance point, according to Commerzbank, which sees this trend as a very positive one for prices in the long term. “Investors appear to be taking profits following the steep $80 price rise since the start of the week. Gold is not able to regain its record high from nearly two weeks ago quite so quickly, in other words. The fact that it is taking somewhat longer can only be healthy in terms of its future price performance,” writes Commerzbank analyst Carsten Fritsch. Meanwhile, gold continues to maintain its positive correlation with equities and is seeing additional support coming from weaker U.S. dollar. “The S&P 500 needed only five months to rebound after its corona-induced slump in March, and yesterday posted a new record high … The reason for this remarkable development – despite the most serious economic collapse in decades – is the same as for the upswing in the gold price in the last few weeks and months, namely the unprecedented expansion of central bank liquidity coupled with a lack of alternative investments,” adds Fritsch. All eyes are now on the Federal Reserve meeting minutes from July, which will be published Wednesday afternoon. “If the minutes reveal that yield curve control or the toleration of inflation above the target rate were discussed at the meeting three weeks ago, this would lend further buoyancy to gold,” notes Fritsch. “This is because real interest rates would then slide even deeper into negative territory in the event of rising inflation. U.S. real interest rates with maturities of up to ten years are already negative.”
