Buy Gold On The Dips And Sell On The Peaks This Week

Gold futures dipped a few dollars over the weekend to trade at 1252.70 while prices bounced up and down in the Asian session with no sure direction. Silver gained 57 points to 16.55 while platinum gained over $10 to 1024.00. Platinum is expected to dip today as trader’s book profits as it diverged from gold. According to Proactive Investors the price of gold fell for a third week in a row as the prospect of a US rate rise loomed nearer. In early Asian trading gold was bought to take advantage of the declines to move to 1255.35 but paid little attention to the declines in the US dollar which fell 13 points at 95.16.

The drop followed the release of the Fed’s April meeting minutes on Wednesday, which seemed to imply that an interest rate rise might be on the cards for June. Although a rate hike was expected by many analysts this year, few expected it to come as early as next month.
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Last week, two billionaire investors went head-to-head, albeit indirectly, with their positions on gold. George Soros, via his Soros Fund Management portfolio, piled around $123.5mln into the world’s biggest gold exchange-traded-fund (ETF), the SPDR Gold Trust. Going the other way, John Paulson, who owns the New York-based hedge fund Paulson & Co., slashed his investment in the same gold-backed ETF by 17%.  Both are heavyweights in the world of investment, although they’ve taken different outlooks on gold in recent years. Soros hadn’t ventured into the gold market for three years while Paulson is a renowned gold bug, famously making US5bln on the metal back in 2010.

At the conclusion of the G7 meetings of finance ministers and central bankers in Japan, this week in foreign exchange was largely focused on the anticipation of, and then reaction to, the Federal Reserve’s latest public communications. The minutes from last month’s FOMC meeting were released in the middle of the week, and the results represented yet another dizzying turn in what has become a Fed-fueled roller-coaster ride for the financial markets.

Although many Fed-watchers had already been anticipating a slightly more hawkish upturn from the FOMC this time around after months of apparently dovish-leaning statements, the central bank went a step further. The most salient aspect of April’s FOMC minutes was the fact that members deemed a June interest rate hike to be likely if Q2 economic data continued to improve as expected. This was among the strongest assertions in recent months from the Fed in support of a potentially imminent rate hike, and the financial markets immediately grasped onto its implications.

The US dollar swiftly strengthened while gold fell sharply from near its recent highs. Jittery stock markets, most notably in the US, experienced heightened volatility, at first plunging but then regaining stability and rebounding towards the end of last week. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding bullion. The metal has rallied 18 percent this year as investors bet the Fed would hold off from further increases.

“The gold environment now is substantially different from what was apparent several weeks ago, when a weaker dollar and a benign rate environment were providing an element of support,” INTL FCStone said in a report. “This is no longer the case.”

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares (GLD), rose by 4.5 tonnes on Thursday to their highest since November 2013.