The Daily Nugget: Gold Falls Back As Dollar Gains

This morning the IMF released their less than optimistic outlook on the health of the global economy; they see "alarmingly high risks" of a greater global slowdown than already witnessed and a one in six chance of global growth falling below 2%. This year the world economy will grow just 3.3%, the slowest amount since the 2009 start of the recession.

The IMF called on both US and European policy makers to “deal proactively with their major short-term economic challenges.” And there is the key to this whole crisis – "short-term," this is how major, influential (dangerous) institutions such as the IMF as well as governments and central banks, believe that many of the symptoms of the financial crisis were solved by issues which can be fixed in the short-term. They fail to realise that these are problems which have existed for a long time and are not only embedded in the system but in the mind-set of those managing it.

Following the IMF’s release today, the gold price originally recovered from yesterday’s losses as hopes of further stimulus were reignited, however after holding steady this morning, gold for immediate delivery has fallen by 0.3% on the back of the strengthening of the US dollar in light of increasing fears for the eurozone. This is likely to worsen following increasingly poor data being released throughout the day reporting the state of both the eurozone and other European countries.

Gold demand has also weakened in both India and China as the high gold price and the impact of the global crisis has begun to hit. This morning the IMF downgraded the growth forecasts for both countries.

Reuters report spot gold will retrace to $1,757/oz during the course of the day whilst other analysts see it finding support at $1,765.75/oz.

Despite gold struggling to regain momentum at present, data released on Friday shows speculators are continuing to build net-long positions in gold and platinum – for the seventh week in a row, showing faith in central banker’s ability to print money and place economies at greater risk is strong.

Analysts believe we are heading back into consolidation mode before gold drives towards $1,800 again. The gold price is expected to fall back by about $30 – $50, which will encourage the Asian buyers, before pushing upwards to $1,800 before the end of the year.

As we finish up, Draghi has just testified at the European Parliament’s Economic and Monetary Affairs Committee and he hasn’t said too much of anything particularly enlightening; Greece needs to do more to implement reforms and euro confidence is starting to improve (where?).

Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.