By: Kitco News- 14 December 2011, 9:10 a.m.
(Kitco News) -Gold Price May Fall Under Year-End Selling: Year-end activities may be weighing on gold prices and the recent weakness does not necessarily reflect underlying fundamentals, says HSBC. The bank says some macro hedge funds are selling gold holdings and taking profits after a difficult year, the year-end is often a hit with low volume and buyers may be hesitant to buy at this time. However, the bank notes since ETF buyers remain constant, this could bode well longer-term. Also, the drop in price could unearth some physical demand. Indian demand has been slowed by a weak domestic currency and a slowdown in economic growth. The break under $1,650 could offset rupee weakness and spur demand. Chinese demand may also support gold prices, the bank adds, citing a 50% jump year-over-year in gold purchases from Hong Kong during October. The resumption of the gold rally, though, may have to wait until after New Year’s, until year-end buying is done. “It is not logical, in our view, to call an end to the bull market while prospects for EM remain positive and ETF holdings remain firm,” HSBC says.
