Market Nuggets: Standard Bank: Gold Moves Lower But 'We Keep The Faith'

Wednesday May 16, 2012 9:14 AM

Standard Bank concedes that more liquidation has occurred in gold than it expected; however, analysts expect this to be temporary and say “we keep the faith” in the yellow metal. The bank says the “underlying casual drivers for gold” have not changed and may even be more bullish than a month ago. Gold was caught up during liquidation of a broad range of commodities as the dollar strengthened, irrespective of fundamentals. However, Standard says the dollar is only a “short-term driver” of gold. “For example, we have seen gold at various levels between $600 and $1,600 for a EURUSD exchange rate at 1.28 over the past five years,” Standard says. “If the dollar was a long-term driver, this would not have been possible.” Standard says it believes the long-term drivers for gold are global liquidity that is still grinding higher and negative real interest rates.