Gold: an overview of the market situation

Gold prices rose significantly today, helped by an increase in physical purchases, after falling last week to two-year low. However, investors continued to reduce their holdings in the biggest exchange-traded fund to its lowest level in nearly three years. From a technical perspective, gold, the value of which fell this year by more than 15% may continue to fall, despite the increase in physical purchases in Asia and other regions. Note also that the last Monday gold has shown the largest ever daily decline in dollar terms, which shocked many investors who have used gold as a hedge against inflation and other market risks.

But, at the same time, as investors fled the market, the fall in prices has reached the pending orders, which increased retail demand. We also add that the U.S. Mint announced the sale of gold coins in the amount of 167,500 ounces (in April), which is the highest level since May 2010, and half of the monthly maximum.

Investors also say that it is likely that the U.S. Federal Reserve may soon cease bond-buying program, which could ease inflationary pressures. Meanwhile, analysts say that the market is subject to intensive sales, while many physical players estimate the prices are really attractive, however, they still believe that the market has gone through a fundamental shift and that a sustained rebound is very unlikely.

The data also showed that the gold reserves in one of the largest exchange-traded fund SPDR Gold Trust, fell on Friday by 0.88% - the lowest level since May 2010. Note that the outflow of capital from exchange-traded funds may mean that investors invest their money in other assets, but the trade data in the United States, which were published last week showed that the funds were invested in gold futures.

The cost of the June gold futures on COMEX today dropped to 1424.30 dollars per ounce.