Economy
Bank of America remains bullish on gold |
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| Economy | |
| Written by Roberta Murray | |
| Wednesday, 23 June 2010 | |
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Gold prices could head lower in the near term, but further rises are expected in the long run.
Bank of America Corp (NYSE:BAC) have today issued research notes that suggest that gold prices are likely to head lower in the near term. In their research note Bank of America says that gold will experience "near-term downside, but maintain $1500/oz target." "We have always worked under the assumption that a CNY revaluation would be gold negative, as it could result in a reversal in FX reserve accumulation flows," says Bank of America. However, given the backdrop of growing sovereign risks in Europe and further EM FX stock rotation into gold, Bank of America believe the near-term downside risks to gold prices are small at this stage. "Thus, we maintain our $1500/oz target by the end of 2011. Moreover, a gradual appreciation of the CNY and other EM currencies could exacerbate capital inflows into EMs, supporting gold accumulation over the coming months and dampening the effects of declining trade imbalances," reads the research note. Gold is currently consolidating around 1240 and traders still seem very happy to remain long. The pull-back of Monday appears to have been contained and buyers are coming back in looking to take advantage of the marginally lower prices. Simon Denham at Capital Spreads says: "The support mentioned yesterday (1233) held very well through the session and our clients were continual buyers every time we dipped under 1235. There is minor resistance at 1242/45, which may bring out some profit-taking, but short-term longs will probably remain in place, as long as we remain above the recent bullish trend line (now at 1234)."
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