Spot gold slid a bit on Wednesday morning, trading about $2.50 per ounce lower at $1,067/oz. This is the new support level for the metal, with no real important technical levels between here and the $1,000/oz mark. There’s a strong psychological significance attached to this price, as gold hasn’t traded below this level since 2009.
What should investors and traders be watching over the next few months with gold prices? We’ve relied on research compiled by U.S. News Money‘s Kira Brecht on what the experts are saying.
Strong Q3 Demand
In response to falling metal prices, demand for bullion saw strong growth in the third quarter. This fresh investment demand for gold an precious metals was felt broadly around the globe: overall demand for coins and bars rose 27% year-on-year, and demand for jewelry saw a 6% uptick, as reported by the World Gold Council. Especially in gold-buying hotbeds like India and China, the prolonged slump at low prices for gold and silver should continue to stir bullion buying.
Two important short-term factors will be Wednesday’s release of the most recent FOMC meeting minutes, and Thursday’s first-time jobless claims report.
Santa Claus Rally
Although the phrase “Santa Claus rally” typically refers to the seasonal jump in retail sales and consumer spending (a trend that often makes or breaks a company’s entire year in sales), it could also apply to the precious metals. Gold generally rises in the lead-up to the Christmas holiday season, as this trend has held more often than not over the last 40 years. A majority of 400 different analysts surveyed by Kitco expressed an expectation for a technical bounce higher for gold in the coming weeks.
Price inflation is always an important component of how gold performs. The slump in the crude oil market has yet to allay as per-barrel prices remain well under $50/bbl. These weaker energy prices have been great for consumers but troubling for the global economy. If inflation fails to pick up, it dampens the appeal of gold. Chicago Fed President Charles Evans, a noted policy dove, has called for the Federal Reserve to be slow and shallow in its interest rate moves if inflation remains subdued. Moreover, Q3 marked the 19th consecutive quarter in which central banks were net buyers of gold.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.