APMA's Nichols: Gold Needs Return O

APMA's Nichols: Gold Needs Return Of Specs, Momentum Traders
Friday October 25, 2013 11:45 AM

Gold needs more speculative interest and momentum-based buying to extend recent gains, says Jeffrey Nichols, managing director of the consultancy American Precious Metals Advisors and senior economic consultant for Rosland Capital. “Gold prices have firmed in recent days, presumably on reduced expectations of Fed tapering anytime soon and on favorable economic news out of China, now the world's largest consumer and a virtual sponge for the yellow metal,” he says. “But it's far too early to boast the yellow metal has regained its mojo and re-established its long-term uptrend. What we need to see is a return of the speculators and momentum traders to the long side of the market. But this requires a daily string of mostly higher prices and a break through key resistance levels, first through the $1,360-$1,380 range and then smartly through $1,400 an ounce, the next big round number. Additionally, sustainable inflows into gold ETFs (exchange-traded funds) would be a favorable indicator of improving gold sentiment among the hedge funds and other institutional players.” With the latest U.S. budget and debt-ceiling crisis in the rear-view mirror, gold traders will refocus attention on U.S. monetary prospects, with expectations of tapering later this year rising and falling with the flow of economic data. “But, before long, America’s dysfunctional politics will again share the limelight as a key gold-price driver,” Nichols says.