The Gold Report: Many of the people we interview have a theory about why gold is performing poorly this summer despite so much global uncertainty, especially in China and Greece. What’s your theory?
Joseph Fazzini: Gold typically plays numerous roles, including being a hedge against inflation, devaluation and economic turmoil, but it’s still a commodity. Most commodities typically come under pressure in a recessionary environment. Right now, the global economic landscape isn’t all that promising, inflation remains minimal and investors prefer other safe-haven investments (i.e., U.S. dollar). As a result, we expect gold to continue performing in-line with most other commodities and remain under pressure.
TGR: How low can gold go?
JF: Recent events have shown that the price of gold can move without rhyme or reason. While some have suggested that opportunistic investors have conspired to drive down the price of gold, weakened investor sentiment has also played an important role. Rather than try to hedge inflation or economic uncertainty with gold, investors from around the world have sought refuge in safety assets like the strengthening U.S. dollar, which moves inversely with gold. With Chinese, European and North American equity markets on precarious financial footing, gold remains out of favor and the bottom is tough to call.
TGR: What about sub-$1000/ounce (sub-$1,000/oz) gold?
JF: With the price of gold recently declining to a five-year low of US$1,088/oz, sub-$1,000 is certainly a near-term possibility. While we hope for the best, we continue to advise caution.
TGR: Is it Dundee Capital Markets’ view that gold could rebound in 2016 or possibly 2017?
JF: We have a constructive long-term view of gold, but in the near term we still see a lot of risk. We’re not ready to call a gold rebound. We would need to see some serious developments in the global economy that would support a …read more