US Dollar’s Stronghold over Gold Prices Continues

Over the past week, the US dollar continued to have a stronghold over gold prices. At New York Mercantile Exchange Comex division, December delivery gold prices went up by $14.50 to close at $1,683 per ounce. The US dollar index dropped by 0.54% to settle at $76.64. Gold price movements indicate that they are closely following the dollar. As per Kitco’s gold index, the prices continued to be volatile trading as low as $1,662.50 and as high as $1,685.50, while the spot price of gold went up by $13. 

Gold prices were also affected by the 2-day G20 meeting in Paris. In order to come up with a definitive solution for the insolvency concerns in Greece and the euro zone debt crisis, world leaders came together last Friday. If gold continues to follow stocks, the price can go up with a definitive plan as there won’t be a need for the investors to liquidate. On the other hand, a solution can also prompt investors to opt for risky assets over safe haven investments like gold. 

Mixed opinions about near term direction

As far as gold’s next move is concerned, expert opinions remain mixed. According to the president of Tower Trading Anthony Neglia, gold price is likely to drop sharply. Neglia believes that it can go as low as $1,635 per ounce. The reason for the volatility of gold prices is that currently the only way to make a profit from the metal is to trade. He also points out that small investors are keeping their distance from the market. Compared to August and mid-September, currently the volume is almost half as the ranges further contract. 

Earlier Neglia expected the gold price to hit $2000 an ounce by the year end, but now he has pushed his time line and believes that the price will reach the estimated level in the first half of coming year. The chief investment strategist at the MarketTrendForecast.com, David Banister, agrees with this. According to Banister, over the coming 7-8 months, gold prices will keep consolidating before going up for a 2-3 year rally. Recently there have been murmurs about legendary investor John Paulson selling his shares, if these are conformed, it can lead to a panic in the gold market.