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Gold is currently trading at $ 1208/troy ounce, as the bulls continue to fight the bears near the channel support area of 1200-1190. Technically the risk reward ratio for long position remains very attractive, but fundamentals remain mixed for the price of gold.
Negatives -
- Rate outlook by FED - Federal Reserve (FED) is expected to raise rates this year, which resulted in a strong dollar that is hindering the bulls as the price gets quoted in dollar and presents a relative value.
- Lack of inflation - Traditionally gold always has remained an excellent hedge against inflation, but current environment of low or falling inflation across economies have not helped the price of gold.
- Risk on environment - Gold performs well when things fall apart and panic in the market, prompting investors to jump into safe havens. With central banks printing money, volatility remains depressed and equity market is performing well prompting lack of haven demand.
Positives -
- Central banks' buying - Central banks across world have started to fill their coffers and diversify the reserve with gold. In 2014 they bought 477 tons of gold, second highest ever.
- Printing money blow-out - With so much money in the market at some point in time, the currencies will start losing value against gold and risk higher inflation.
- Demand for traditional use - latest report from WGC shows that jewellery demand remained robust especially from China & India that is to support the fundamental strength of gold.
