Are Gold Bugs Sweating Bullets Over February?
It was not exactly a lovely February for gold bugs. Between talks of a great rotation into risk-on assets, and confusing language from the Federal Reserve, the precious metal experienced heavy-selling pressure to reach new multi-month lows. However, gold investors may not be sweating the decline like some expect.
In late February, the price of gold dropped below $1,600 an ounce to its lowest level since July, and even trigged the headline-grabbing death cross status, a bearish technical term for when the 50-day moving average crosses below the 200-day moving average. While multi-year high equity prices have been promoting riskier assets, the decline was aided by the latest Federal Open Market Committee statement creating fear that the central bank may end quantitative easing programs sooner than expected.
Headlines hit publications across the board touting the weakness in gold and questioning the 12-year bull market. Goldman Sachs, the bank that recommended clients sell Heinz shares before the announced buyout by Warren Buffett, added to the pessimism in gold by slashing its price targets. The bank now has a three-month target of $1,615 per ounce, down from $1,825. The six-month and 12-month targets were also cut to $1,600 and $1,550, down from $1,805 and $1,800, respectively.
If you would like to receive professional analysis on miners and other precious metal investments, we invite you to try our premium service free for 14 days.