Spot Gold Prices Firm after Tumbling Due to Euro Zone Crisis Worries

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Precious Metal Brokerage Group International (PMBG) suggests that as spot gold seems to have firmed up, savvy long-term gold investors will recognize similar ranges tested a year ago at these levels and may reconsider the wait-and-see approach that some gold bulls have broadcasted publicly lately, especially with the upcoming FOMC meeting this late in an election year being right around the corner.

In recent weeks, gold has clearly been under intense pressure from a dollar rally. However, even with the uncertainty looming over the possible launch of a third round of quantitative easing (QE3), by the U.S. Federal Reserve, gold looks like a potential pragmatic position either way. The good news is that after posting its biggest one-day decline since late June this year, spot gold has more recently shown a narrowing range over the last two months. Some investors who were looking for more progress on resolving the Euro Zone debt crisis were disappointed after a recent meeting of the region’s finance ministers.

After sharp gains earlier this year and a notable decline that started in late February and continued through mid-May, spot gold seems to have settled into oscillating within a narrowed range between $1,550 to $1,625 an ounce, testing the $1,550 level a handful of times since and most recently closing just over $1,570. Investors who have followed gold over the last year will recognize that the last time it hovered at these levels it soon shot up to over $1,900 an ounce. For August, the U.S. gold futures contract edged down recently again reflecting near-term uncertainty. A representative of Precious Metal Brokerage Group International (PMBG) explained, “The narrowed oscillating characteristic of gold within a range of $1,550-$1,600 is probably going to remain at least until the upcoming FOMC at the end of this month. The pressure on the upside does likely stay without QE3 and prices could drift without a clear direction if the Fed doesn’t provide a clear stance on pre-election leanings. Many investors may very well stick to a sell-on-the-rally and buy-on-dips strategy until closer to the meeting. However, from a long-term perspective we expect a certain percentage of experienced gold investors will use these next two weeks to increase their position, at what is seen by them as an historical discount, versus waiting until after the FOMC meets.” Per technical analysis, spot gold does show a likelihood of retesting the $1,550 level again soon and gold dealers suggest some will look for dips below $1,565 as their entry point.

The U.S. Federal Reserve’s stance on further monetary easing will be closely monitored by investors using U.S. economic data to gauge the likelihood of possible changes. Though the physical market was subdued, the inverse correlation (one asset rises and the other declines) between the dollar and gold was the strongest in nearly two months recently at -0.56 and a reading of -1.

About Precious Metals Brokerage Groups International, LLC (‘PMBG’):

PMBG is a leading, U.S. based precious metals trading firm and a proud member of the Better Business Bureau with an ‘A’ Rating. The company offers a full range of internationally recognized precious metals investment products including gold coins, silver, palladium, platinum and other bullion coins. Precious metals are delivered via direct, insured mail to your home or for secure depository storage for 401k, 403b, and self-directed IRA accounts. Prospective investors can call PMBG directly at 1-800-516-PMBG (1-800-516-7624) or log into http://www.pmbg.net/ to learn more details on setting up gold IRAs, gold 401ks and other precious metals investment and retirement accounts.

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