Gold falls to 1-month low, but investor sentiment improving

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Spot gold fell to a one-month low of $1,205.72/oz. in early trading Tuesday, despite a breakdown in talks between Greece and its creditors regarding the country’s debt.

Greek officials rejected a proposal set forth by Eurozone finance ministers to request a six-month extension of the country’s international bailout, furthering concerns of Greece exiting the euro (which the media is calling a “Grexit”). However, an official with close knowledge of the situation has said Greece will seek an extension on Wednesday. Leon Westgate, an analyst at Standard Bank, said in a note to clients that gold is “likely to be rangebound until the situation becomes clearer.”

UBS analysts gave another reason for gold’s dip in price: Chinese traders are away from their desks until next Tuesday for the Chinese New Year holiday. China is second behind India for gold consumption, so a temporary lull in Chinese demand “removes a natural cushion and therefore increases gold’s downside potential.”

Despite gold’s recent drop, Bank of America Merrill Lynch’s Fund Manager Survey for the month of February revealed a shift in gold sentiment towards the bullish side.

A press release on the survey states:

“Sentiment towards gold is also improving. Forty percent of survey participants expect the price to be higher in 12 months’ time. Last month, bears on the precious metal still outnumbered bulls.

Only a net 3 percent now considers gold overvalued, compared to a net 20 percent as recently as December.”

The release did not give a reason for this change in sentiment, but there’s a high chance it’s related to the fears of a Grexit, which could have wide-reaching effects on markets worldwide.

Take advantage of the lower prices and protect your portfolio from market uncertainty with physical gold. Call American Bullion today at 1-800-326-9598 to speak with a precious metals broker, or request your Free Gold Guide.

About American Bullion

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Photo: By Eva K. (Eva K.) [FAL or CC BY-SA 2.5], via Wikimedia Commons

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1 Comment

  • […] Spot gold fell to a one-month low of $1,205.72/oz. in early trading Tuesday, despite a breakdown in talks between Greece and its creditors regarding the country’s debt. Despite the drop, Bank of America Merrill Lynch’s Fund Manager Survey for the month of February revealed a shift in gold sentiment towards the bullish side. A press release on the survey stated “Forty percent of survey participants expect the price to be higher in 12 months’ time.” Read more in Monday’s blog. […]

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