Gold prices are trading at their lowest level since mid-January on Thursday, dropping below $1,650 an ounce after reports showed manufacturing may contract from China to Germany and a stronger dollar curbed demand.
According to the HSBC flash purchasing managers index, China's manufacturing activity shrank for a fifth straight month in March, with new orders sinking to a four-month low and the overall rate of contraction accelerating. The data spurred a broad decline in commodities across the board and fueled concerns about China’s overall retail gold appetite.
Precious metals are also under pressure from reduced physical demand in India, the world’s largest consumer of gold. Jewelers in north and east India are on strike this week in an effort to protest higher taxes on gold imports, which has left about half of the nation’s stores closed. According to reports, approximately 150,000 stores across the country are expected to reopen today after a five-day stoppage.
"A lot of people are on the sidelines at the moment," said Yuichi Ikemizu, head of commodity trading, Japan, at Standard Bank. Speaking to Reuters, Ikemizu said that while there are still a number of bearish signs that could pose a headwind to gold in the near term, the overall market remains well supported.
GFMS Global Head of metals analytics, Philip Klapwijk is urging investors to use the current correction in the gold market to increase their holdings of the precious metal, saying prices are still on track to hit $2,000 an ounce - possibly in late 2012 or early 2013. Klapwijk suggested that while a brief dip below $1,600 is not out of the question, the global macro environment, notably zero-to-negative real interest rates, still favors investment. In addition, Klapwijk said he would not rule out the potential for further easing by either the ECB or the Fed before the end of the year.
GFMS: $2,000 Gold Possible, Buy This Dip
Posted March 22, 2012
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