Is gold back despite Soros & Paulson selling?

Posted by Justin Pugsley - Resource Investor

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An abatement in the wave of speculative selling pressure is allowing strong demand for physical gold (COMEX:GCU13) from Asian buyers to assert its influence over the price and there is a growing case to be positive over the prospects of the yellow metal.

However, a number of factors have hurt gold in recent months, not least position liquidation by star traders George Soros and John Paulson. But those are short-term influences. The elephant in the room for gold continues to be the U.S. Federal Reserve’s plans to taper its $85 billion a month bond purchasing program.

The real questions remains whether the U.S. economy is strong enough to withstand its withdrawal, an assumption that is yet to be fully tested. However, bond yields have been rising in anticipation of this event, which increases the cost of credit to the real economy.

Now for the bullish case for gold. With September barely two weeks away there are already possible signs that the Eurozone crisis is resurfacing with German finance minister Wolfgang Schaeuble talking about another Greek bailout. If that revives concerns over the health of peripheral economies and hence the survival of the euro, it could create a search for ‘end of the world’ type insurance offered by assets such as gold.

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