Morgan says gold could hit $260s before UK auction
LONDON, May 24 - Gold could hit the low $260s or less during the coming weeks on chart-driven
bearishness and poor sentiment, although Britain's planned July 6 auctions may prompt a recovery, J
P Morgan Securities said on Monday.
"The gold market is extremely short, offering some chance for short-covering rallies," Kevin Crisp, J
P Morgan's precious metals strategist, said in a report seen by Reuters on Monday.
"On balance, however, and particularly over the next three weeks in the run-up to the UK's first gold
auction on July 6, there is a strong chance that gold will move lower, driven by the market's current
momentum and negative technical indicators," he said.
Consumer hesitancy at current prices meant demand was unlikely to come to the rescue yet.
"A short-term downside for gold in the low $260s is now possible, while technical indicators point to
an objective in the low $250s over the next month," he said.
Gold has fallen from near $290.00 on May 7, the day Britain announced plans to cut reserves from
715 to 300 tonnes in the next few years, starting with a 25-tonne gold auction on July 6.
It fixed in London on Monday morning at $272.20 a troy ounce, a fresh 20-year low.
Crisp said the first auction might prove a turning point.
"The 25 metric tonnes being offered every other month by the UK could easily be many times
oversubscribed and, if this is indeed the case, could send a positive signal to the market."
Morgan advised buying a $275.00 put option while selling two $260.00 puts, all to expire on July 2.
yahoo.co.uk
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