Gold Prices Witnessed the First Weekly Decline in Previous Four

Gold prices have interrupted the 12-year old bull market, losing nearly 23% so far in the year 2013. The yellow metal stood in the “Bear” line after losing nearly 33% from October 2011 high of $1921. The prices have dropped nearly 22% during April to June as compared to March closing, gold gained 7.4% in the month of July (termed as highest jump since January 2012). It is currently trading near $1278 with nearly 3% loss in the month of August.

Lack of demand can be termed as main drivers of these long liquidations which were then coupled by improving economics at US. World’s largest economy, US, has started shrugging off the pessimism, as indicated by recent improvement in labor market, manufacturing and service activities. Simultaneously market has also started expecting a sooner tapering of Federal Reserve’s $85 billion monthly asset purchase program but Federal Reserve, not being so sure of recovery, kept on avoiding the exact timings of tapering, which ultimately drove Gold prices last month.

On the buyers’ side, China trimmed their purchases of gold as net gold imports from Hong Kong fell 4.8% in June to 101 tons as against the 106 tons in the previous month. India, on the other hand, is facing severe conditions due to widening current account deficit and tries to curb the gold imports as much as possible. SPDR, world’s largest bullion backed ETF, liquidated nearly 436 tons of gold during 2013, yesterday the fund’s holdings tested the lowest level since February 2009 by being at 915.04 metric tons.

Considering the recent economic updates from US, traders are expecting September can be the good start for wrapping up the monthly monetary stimulus by Federal Reserve, which is paving the strength of US Dollar. Recently Federal Bank of Dallas President, Richard Fisher, indicated on August 5^th that the Federal Reserve is closer to tapering while in separate news yesterday Federal Bank of Chicago President, Charles Evans, said considering the good improvement in labor market, tapering of bond buying in September can be possible. Hence, Fed meeting near September 17-18 is more important for US Dollar than any other events. On the European side, ECB is on its continuation to the loose monetary policy with the expectations that the economy is still witnessing downside risk which indicates further strength for US Dollar.

To Sum up, Gold prices, which started its down trend due to lack of demand and strengthening US Dollar, are expected to witness further southward trend considering the weaker demand and weakness at largest consumers coupled with probability of future strength of US Dollar.

Original Article: Admiral Markets and hyper link Admiral Markets with http://www.admiralmarkets.com/