Gold bulls get a sniff of hope from India, Cyprus: Clyde Russell
Until Cyprus's banking woes hit the headlines last week it had all been downhill for gold this year, with investors selling amid a slew of analyst downgrades.
The question is whether the Cyprus situation is just a temporary blip in an otherwise bearish story, or whether the 3.6 percent rally in spot gold since the Feb. 21 year low is the start of something more sustained.
The recent downgrading of gold price forecasts by several leading banks would suggest that the market has grown weary of waiting for gold to resume its decade-long rally and finally crack the $2,000-an-ounce mark.
The bearish view is supported by the recent drop in net-long positions, as reported by the Commodities Futures Trading Commission, to the lowest level in six years, as well as the 7.3 percent drop so far this year in exchange-traded fund holdings.
Furthermore, the fear that monetary easing in the United States, Europe and Japan will eventually stoke rampant inflation has so far remained just that - a fear, so far unrealised and with little short- to medium-term prospect of materialising.
But to my mind the most convincing bearish argument has been slower physical demand, particularly from top consumers India and China.
I have long argued that for gold to resume its rally, which peaked at just over $1,925 an ounce in September 2011, it will take renewed buying from China and India.
And it is here that the gold bulls may just be able to take some comfort, as there are signs that demand in both
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