After the sell-off in gold following the U.S. Fed's hint to a halt of its asset purchases next year, chances of rebound of the yellow metal shrank further, said the head of precious metals at Emirates NBD (ENBD) in Dubai on Saturday.
During the week, gold prices lost 96 U.S. dollars or 6.88 percent to a 3-year low at 1,298 U.S. dollars an ounce, down 96 U. S. dollars or 6.88 percent from last week, said ENBD precious metals head Gerhard Schubert in his published weekly assessment.
He added that "somehow, it appeared to me that the market was to a certain extent premeditated in selling gold off," "as the United States federal reserve chairman Ben Bernanke had not substantially revealed anything new."
On Thursday, the Fed chairman said he expected to begin reducing the purchases of bonds and mortgage-backed assets (MBA) later in 2013 and will further stop those purchases by mid 2014, depending on the development of the economic data. The announcement triggered a sell-off at global equity and commodity markets.
Schubert added that investors can't expect a relief rally through physical buying in China and India this time.
The downward momentum on the price of gold, which is regarded as a safe haven in times of crisis and high inflation, would remain. Physical buying in China continued but they cannot support the market on their own, said Schubert.
The Indian government recently discouraged gold imports completely "and some major companies, like RELIANCE, complying with the government and stopping all gold related activities," said the ENBD expert.
"The best chance for the gold market for a relief rally, and it would be nothing other than a relief rally, is the strongly growing short positions on the futures markets," stated Schubert.
The net-long positions on the New York Commodities Exchange or Comex had been further reduced, he explained, "and that does not even take into account the events from Thursday and Friday."
Regarding the mid-term outlook, Schubert added that the gold market was now firmly under the control of the shorts and that was most likely going to stay this way, "until the market finds a real spark to force these shorts to cover their position."