Despite gold’s sharp fall in recent trading sessions leading to skepticism and mass of sell-off of the precious metal, it is "important to remember" that quantitative easing that undermines confidence in currencies and makes gold more attractive as an asset, is still very prevalent around the world, according to Gary Dugan, chief investment officer Asia and Middle East, Coutts.
While gold’s price fell heavily in April, there was a sizeable increase in retail demand for physical gold, said Dugan, highlighting that the most recent World Gold Council (WGC) report, published on 16 May, shows that even prior to a significant setback in price, jewellery demand was strong over the first quarter of 2013.
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Jewellery demand in the US showed the first year-on-year increase in five years, according to the WGC report.
Dugan said, "Not only is the Bank of Japan expanding its balance sheet with great vigour, but the US Federal Reserve has explicitly left the door open to more QE if the economy needs it. In the eurozone, an expansion of QE is likely to follow the recent cut in interest rates.
"The gold market is very technically driven at the moment, so the price needs to hold near current levels for there not to be a fresh wave of selling down to US$1,200. If the US$1,350 level holds, we expect the market to trade in the relatively tight range of US$1,350-US$1,480, as retail demand for physical gold continues to provide support while investors keep selling into any rallies."
