Somebody Big Is Sitting On The Gold Price Says Ross Norman

Somebody big is sitting on the gold price and a relief rally when the Fed raises interest rates is ‘a distinct possibility’, Ross Norman, CEO of Sharps Pixley and London Bullion Market Association’s top forecaster of the past 15 years, told ArabianMoney today.

‘Gold is looking like the dog that just did not bark – but not uniquely so,’ he commented. ‘Most safe haven assets are looking distinctly lacklustre, including the VIX index.

Safe haven

‘Either 5,000 years of safe haven buying has just become bunk, or there is a desire to portray what it is evidently a financial and economic crisis as nothing to be concerned about.’

However, things look very different to eurozone gold holders whose currency has depreciated around 15 per cent against the US dollar.

‘European gold investors saw a 10 per cent gain last year and are up eight per cent year-to-date,’ pointed out Mr. Norman. ‘So again gold is doing what it should do, and that is to provide a means of hedging ones exposure to a currency crisis.’

Will an interest rate hike by the Federal Reserve really be bad for gold as Goldman Sachs predicts, if or when it happens?

Mr. Norman noted: ‘I think a rate hike must rate as the most telegraphed move in the history of financial markets and as such it must be fully factored into the price. When it does eventually come, say in Q1 2016, I could see a relief rally in gold as a distinct possibility.

‘Gold is looking rather like the late 1990’s when it became horribly price elastic – with selling on price strength and buy on dips with volatility falling dramatically as the market reverted to the mean.’

$1,450 an ounce?

In January Mr. Norman forecast a peak gold price of $1,450 an ounce for the year (click here). That’s looking a bit on the optimistic side with gold trapped in a trading range.

But if the Chinese stock market crash, or the Greek exit from the euro, overspills into global financial markets then all bets are off, and if past performance is any guide then gold will fulfill its historic role as a safe have when markets are really in serious distress.

Gold is always the ultimate bubble in global financial cycles but we are not there yet.

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