Gold on Track for First Yearly Drop in 13 Years

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Oct. 25 (Bloomberg) -- Bloomberg's Julie Hyman and Michael Purves, chief global strategist at Weeden & Co., put futures in focus with a look at the factors impacting the price of gold in "On The Markets." They speak on Bloomberg Television's "In The Loop."


We have seen a little comeback.

You are actually pretty optimistic on gold.

It is not 2010 in gold, but my optimism is very measured.

There are a couple of interesting trends to look at.

If you look at the basket of developed market currencies, it was really strong.

If you look at the trend in gold, it was rallying at 10 years.

Many were saying the dollar strong and gold will be perpetually week.

What has happened in the past couple of months is that the dollar has started weakening pretty noticeably.

It is not tragic weakness, but it is not rallying anymore and it has started to get weakened.

As that has happened, it has helped to put a stronger base in gold.

And i know you are watching some of the technicals in gold.

Speaking of a stronger base, we have seen a long downtrend in gold and that has been broken to some extent.

The consensus is that the bear is going to try to run this back down to the lowest we saw, the 1185 back in april.

They never really got that done.

And as they did that, they kind of handed the ball back to the bulls.

And it is not like it is rushing forward, but every that the charts stay more or less where we are now, it creates a stronger platform going forward.

The fed, of course, has to play into where you see gold prices.

And the consensus now seems to be that we will be tapering.

It will be next year, not right at the beginning, but pushed back into the spring.

Inevitably, when rates start going up, won't that hurt gold?

The thing to watch is rate volatility, too.

And why are rates going up?

When you look at gdp for next year, bloomberg consensus is 2.6%. in 2012, the gdp came in at 2.8 %. it is not like we are seeing escape velocity here.

Any tapering that we do get is likely to be more measured and conditioned than ever.

And let's not forget, the fed did a massive 180. they have to be very deliberate going forward.

What would be your strategy with regard to gold?

Short data.

You still going against the tape.

The trade i like is the options for a selling gld put in november, the 133 foot two by the 133 call.

-- the 133 put to by the call.

And you still make a little bit of money.

As you say, measured optimism on gold.

Michael, thank you for coming in.

Good to see you.

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