Another factor driving the pressure on Gold prices is investor confidence in the Equity markets. Investors have been reassured by Global Central Banks’ willingness to loosen their policies and in turn increased their allocation to risk assets while reducing their safe haven assets.
However, over the last couple of weeks, some corporate earnings have been less than stellar. As we approach the month of May, many market prognosticators are starting to use the phrase, “Sell in May and go away,” referring to the Equity markets.
With investors realizing a spectacular first quarter of profits in the Equity markets, some investors might just adopt that philosophy and start to rotate their investments into other products. After all, there is a lot of money on the table to protect.
What gives the holders of long positions in Gold market a feeling of confidence are the reports that there is continued purchasing of physical Gold by Central Banks around the globe who are steadily increasing their Gold reserves. According to our sources, they expect this trend to continue.
What might have recently caused some of the selloff in the spot price of Gold (as we have been reporting in recent additions of the Market Gage), is the selling of significant amounts of Gold out of Venezuela trying to raise cash and circumvent the strong sanctions imposed on President Maduro.
Now that the selling out of Venezuela seems to be over, along with some disappointments in corporate earnings, the possibility of higher Gold prices do exist. As always, we will be watching the action in the Dollar Index to give us guidance of future Gold price trends.
We cannot emphasize enough the impact that the Dollar Index has towards the price of Gold.
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