A very quiet day for financial markets sees risk assets relatively unchanged following a mild contraction of U.S. pending home sales, dipping 0.4 per cent for the month of June. The number mildly beat market expectations.
Global stock indices are sympathetic of what has been a relatively quiet patch, allowing investors time to position ahead of further central bank action. The market continues to believe that any tapering will not be severe and that monetary policy from the world’s largest economies will remain supportive. Gold has reflected this assumption well.
Notwithstanding various banks revising their year-end forecast lower, gold has made back some important ground, delivering a modicum of hope for the bugs. Whether the pessimists like it or not, central banks are still buyers of bullion and the physical market remains firm. Gold could well underperform as developed world economies strengthen and market participants turn away from gold, but investors with very long horizons will likely consider any weakness as opportunity.