Nichols: Bremain pullback in gold price a bargain opportunity

On Wednesday gold dropped to a near two-week low following a volatile retreat from a 22-month high above $1,300 an ounce hit last week.

In late afternoon trade on Wednesday gold futures in New York for delivery in August, the most active contract, fell to a low of $1,263 an ounce, down nearly $30 this week. Last week the metal hit an intra-day high of $1,318.90 the highest since July 2014 and year to date remains in bull market territory, up 20% or more than $200 an ounce.

Gold has been capitalizing on a weaker US dollar, a collapse in bond yields, weakness and volatility on equity markets, and fears of the financial fallout from Britain leaving the European Union. This week’s retreat has been blamed on polls showing a Bremain outcome more likely than a Brexit.

Jeffrey Nichols of American Precious Metals Advisors and Rosland Capital, says while a vote to stay in the EU could lead to gold moving lower again, the pullback this week indicates financial markets may already have priced in a continuation of the status-quo.

And says Nichols, the status quo remains positive for gold and this week’s pullback is a chance to pick up bullion cheaply before the uptrend continues:

“Persistently disappointing economic and financial-market performance with weaker-than-expected business activity in the United States and, even more so, globally, will force the Fed and other central banks to keep their feet on the monetary accelerator:”

Indeed, against a backdrop of “secular stagnation”, the Fed will find it difficult to raise short-term interest rates and may seek alternative monetary measures to stimulate the economy. The European Central Bank, the Bank of England, the Bank of Japan, the People’s Bank of China, and other central banks will similarly undertake more stimulative easy-money policies – policies that are decidedly pro-gold.

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