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Bad news is serving as good news for gold
Gold bugs might have reason to expect further gains after gold (CEC:Commodities Exchange Centre: @GC.1) prices surged Wednesday on lackluster U.S. data.
Disappointing retail sales weighed down on the U.S. dollar (Exchange: .DXY) this week, as the markets contemplated the possibility that a Federal Reserve rate hike may not happen as soon as expected. With the dollar lower, bullion rallied 2 percent on Wednesday and now trades back above the $1,200 mark.
"The main catalyst was the retail sales slumping," said Phillip Streible, senior market strategist at RJO Futures. "It disappointed a wide audience. Because of that, a rush was back into gold as the dollar sold off hard. It looks like [we] won't see a rate increase in the immediate future."
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Streible's view on rates is echoed by Erin Gibbs, equity chief investment officer at S&P Investment Advisory Services.
"The consensus is that the Federal Reserve won't raise rates before September at the earliest," said Gibbs, who has $16 billion in assets under advisory. "Low U.S. [rates of] interest is good for gold, which is an alternative asset class investment when other assets such as low yield-bearing debt look less attractive."
But Larry McDonald , head of U.S. strategy at Societe Generale, sees gold's latest move to be a mere blip in its long-term downtrend.
"It's a classic gold rally within a bear market," said McDonald. "We've had 16 of these since 2011."
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