Gold investors were not happy last week after the bullion ended flat for the week and the Direxion Shares Exchange Traded Fund Trust failed to hold on to gains. The bullion had earlier touched a weekly high of $1,352.7 an ounce on Wednesday before it dropped down to $1,327.80 an ounce on Friday. The U.S. Federal Reserve dampened the outlook on gold on Friday after it hinted that it would soon raise interest rates.
As at Friday, the Fed’s body language towards raising interest rates caused the fed funds future to jump to a 30% probability for a September rate hike. The Fed funds future still has a 50% probability for a December rate hike. In response to the renewed talk of a rate hike, holdings in the SPDR declined to 939.94 tons on Friday down from 952 tons on Tuesday.
Data releases could spur or spook the bullion this week
Gold and the Direxion Shares Exchange Traded Fund Trust are in a very sensitive position in which the yellow metal could break out to new highs or break down to previous lows. This week is pregnant with a few critical data releases and the content of the economic data could either spur the bullion to new highs or spook investors to trigger a selloff.
On Thursday, the August retail sales data will be released and the content of the data will help investors draw inferences about the economic outlook. The retails sales data in July was down 0.3% across all categories expect in automobile sales. Investors’ faith in the economic recovery will be restored if the August retail sales data is impressive and investors will have fewer reasons to seek refuge in the bullion. However, if the August retail sales data turn out to be worse than expected, investors will seek refuge in the bullion and gold prices will rise this week.
On Friday, the market will be treated to data on the highly important Consumer Price Index data. Economists have expected the core CPI to increase by 0.2% in August and they expect inflation to increase by 0.1% in August up from the July readings.
Wall Street anti-gold wealth manager is buying bullion
Despite the apparent lackluster outlook for the bullion and the Direxion Shares Exchange Traded Fund Trust , gold bugs are still optimistic about the prospects of the yellow metal. However, more surprising is the fact that Richard Bernstein, an anti-gold Wall Street wealth manager is now buying the bullion for his clients.
Bernstein had never seen sense in buying or holding the bullion and he never bought the bullion during his 35-year on Wall Street – Bernstein was once a chief investment strategist for Merrill Lynch. More so, he used to rile bullion investors when he taught at New York University’s Stern School of Business where he often claims that gold is not much different from the wampum shell beads of American Indians.
However, Bernstein has had a rethink on his position on the yellow metal and he now considers the yellow metal a real asset. He says, gold is “a real asset that we ascribe some romantic value to, that kind of becomes a pseudo-currency… You buy real assets when inflation expectations are starting to go up.” Interestingly, Bernstein doesn’t consider himself a gold bug but he thinks that the bullion might provide a measure of stability when the next wave of volatility hits the market.