Analysts: Stay With Gold, 'This Market Will Rally'

Thursday, 18 Apr 2013 07:44 AM

By Michael Kling

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Some investment experts are sticking with gold despite its recent precipitous drop.

Gold will probably quickly recover when traders shorting gold start to unwind their bets, states Clifford Bennett, chief economist at The White Crane Group, according to CNBC.

“I sincerely believe that the moment the now significant short position holders begin to take profit, that this market will rally at least 50 percent of the fall just seen, just as rapidly,” Bennett writes in a note, CNBC reports.

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That’s because fundamentals that previously supported gold are still in place, Bennett argues.

“Nothing has changed except perceptions, and with gold that matters a lot. Yet the perception that the market is oversold will also develop in coming days.”

In addition, the lower gold prices will attract Chinese and Indian central banks, which will be eager to take advantage of the situation, Bennett predicts.

“The central banks of China and India must be salivating,” he says, “but will hold their cards close to their chest to see just how far the market can fall before they make an aggressive purchase.”

Others agree that this is a good time to buy the precious metal.

“All the signs I’m seeing make me more bullish on gold not less bullish. Maybe India has been buying less but that’s picked up over the past few days and numbers out of China haven’t been that bad,” David Baker, managing partner at Baker Steel Capital Partners, tells CNBC.

“Our thesis is that currencies are being debased by money printing.”

Commerzbank analyst Daniel Briesemann agrees that the lower prices present an opportunity, according to Bloomberg. “The low prices are clearly being viewed as an attractive opportunity to buy gold,” he writes in a report. “Central banks of emerging economies are also likely to take advantage of the low price level to buy additional gold to diversify their currency reserves.”

In fact, Central Bank of Sri Lanka Governor Ajith Nivard Cabraal tells Bloomberg Television that central banks are more likely to buy more gold because of the drop in price.

“Everything isn’t looking that rosy, so gold should hold up,” says David Poh, regional head of portfolio management solutions at Societe Generale Private Banking, according to Bloomberg. “This tumbling over the past few days is overdone. We think a good time to accumulate is at the $1,300 level.”

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