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Commodities
Gold: No Rally Means Bad News?
FNArena News - July 06 2010

By Rudi Filapek-Vandyck

There is a saying which carries a lot of truth: if a market fails to rally on positive stimuli, it's probably an indication all is not well. If my observation is correct, the saying is increasingly being used in relation to gold.

Global risk appetite is clearly in retreat and equities are on an uninterrupted losing streak in June, on top come continued concerns about bank balance sheets in Europe, not even mentioning the concerns relating to what governments might be up to across the European continent.

Yet, gold has failed to rally to new highs, falling back towards US$1200/oz instead.

Commodity analysts at JP Morgan suspect falling growth expectations for the global economy, the US in particular, is what is weighing upon the gold price in June. The logic behind this reasoning is that lower growth inevitably weighs on inflation estimates and since gold is partly a hedge against inflation, et cetera, et cetera. 

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