Gold Rises Supported By Fund Inflows
- Gold rose slightly on Tuesday as Asian shares reversed gains and the dollar slipped, with the metal also supported by big inflows into bullion funds.
- We do not expect recent pace of rises to be kept in the near term, especially if stock markets strengthen. Greater investor risk appetite erodes demand for gold, while increased scrap adds to supply as major consumers are shying away from physical purchases.
- The volatility index (VIX), which measures implied volatility of stock options and is often seen as an investor fear gauge, fell below 20% this week, hitting the lowest closing level since early January.
- But we do not think that recent decline in gold prices means that the rally is over. Demand for bullion exchange traded funds and possible weakening of the dollar could support the metal in the medium- and long-term. Assets in SPDR Gold Shares (N:GLD) Trust, the top gold-backed exchange-traded fund, rose 2.64% to 752.29 tonnes on Monday, the highest since March 2015. The fund's inflows since the beginning of the year have already surpassed outflows for the whole of 2015.
- We keep our trading strategies unchanged. Gold price is still above a strong support level is 1200.00, which is a psychological barrier and 14-day exponential moving average, which keeps current bullish sentiment intact.
Source: Growth Aces Forex And Precious Metals Trading Strategies