Anticipate a Reversal in Gold?
Gold prices eased below $1,700 on Wednesday for the first time in seven weeks, as the market continued to see money flowing out of gold as indicated by open interest. Indeed, bullion is on track to break a 4-month winning streak, down about 4 percent in October.
Early this month, gold futures prices failed to cross above the $1,800 level, prompting speculators to reduce their net-long positions. With gold now trading below its 50-day moving average, is the precious metal poised for a comeback?
Asians are the largest consumers of gold bullion. And according to the World Gold Council, India and China dominate the global consumer demand for gold which accounted for a combined 45 percent of total jewelry, bar and coin demand in Q2 of 2012.
As the autumn festivals of Diwali approach in India, so does the lavish wedding season when high demand hits into gear. Similarly, the Chinese New Year in the spring, historically, provides an additional boost in demand.
Dating back to 2,000 gold has gained an average of 8.3 percent from November 1 through the end of April, outperforming the broader S&P 500 index by 4.6 percent. Will history repeat itself this year?