Gold Outlook Remains Strong Despite Tuesday's Selloff

02/25/09 12:13 pm (EST)

(CEP News) - Tuesday's strong equity rally took some of the steam out of gold prices, however the precious metal is showing signs of recovery Wednesday afternoon.Some strategists say the recent dip in prices was seen as a good buying opportunity .

Risk appetite/aversion continues to be the main driver of gold price fluctuations seen recently. Gold prices hit a low of $951.65 an ounce overnight but strong gains were made early in the North American session as equities sold off sharply.

Heading into the afternoon, equities are off their lows while gold prices are down from their highs, trading below $970.

Dennis Gartman from the Gartman Letter said he is using this dip in gold prices to extend his long positions. "We've waited patiently for this break, fearful that it would take place sometime along the way, and finally it has," he said.

Mike Glaser, futures broker from LaSalle Futures, said that despite Tuesday's selloff, gold is still in a strong uptrend, despite the risk that it doesn't break through $1,000 in the short term.

"I think we could see prices stabilize and trade sideways for a while before we get that final push higher," he said.

Glaser said fear sentiment continues to dominate financial markets, which will be supportive for gold prices.

"I think investors should keep themselves open to acquire gold on these dips," he said. "A year from now we could see these prices as a bargain."

WTI crude oil is up $2.10 to $42.06 while ICE crude oil is trading up $1.34 to $43.84.

Meanwhile, ICE RBOB gasoline futures are up $7.30 to $115.67 and Globex natural gas is down $0.01 to $1.27. Heating oil at the ICE is up $2.97 to $122.36.

In the mining sector, spot gold is trading up $7.83 to $970.50 USD. In Canadian dollars, gold is up $22.40 to C$1218.74. Silver contracts at the CBOT are up $0.29 to $13.98.

Bloomberg's index for base metals is up 1.50 points to 110.13. Wheat futures at the CBOT are up $4.25 to $530.50.

All data taken at 12:09 p.m. EST.

By Neils Christensen, neilsc@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

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