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Hansen: Gold bounce back probably won't last
Gold bounced back from a three-months lows on Monday, after US lawmakers failed to reach an agreement with regards to the debt ceiling over the weekend. According to Saxo Bank's Ole Hansen, the metal didn't receive any safe-haven bids and total ETP holdings fell by 12.7 tons to USD 1,909.8 - the lowest level since May 2010.
That said, Ole explains the sentiment among most analysts is that a last-minute deal will be reached, in order to avoid a technical default in the US.
Whilst this may sound positive, it's not necessarily so for gold, because when that occurs, Ole says the focus could "quickly switch back to speculation about when the Federal Reserve will begin to reduce its stimulus programme".
And a reduction in asset purchases - together with an economic recovery - carries the risk of higher bond yields, which is non-supportive for gold.
Congress has until 17 October to raise the debt ceiling, or risk defaulting.
Read more about Ole's predictions here:
http://www.tradingfloor.com/posts/etp-flows-non-supportive-gold-lingers-near-three-month-1415207745
01:47 minutes
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