Morgan Stanley Asks, 'What's Driving Gold?'

Courtesy of Benzinga.

While other commodity prices have further softened recently, Gold rallied – rising from December low of $1,174/oz. to touch $1,300/oz. Joel Crane, an analyst at Morgan Stanley, expressed pessimism that the gold rally will continue further.

Morgan Stanley notes five potential catalysts driving demand: (1) pessimism for global economic activity; (2) reallocation from Swiss banks; (3) anxiety of a Eurozone breakup; (4) the ECB’s QE program; and (5) lack of other opportunities within commodities.

Crane notes that the inverse correlation between gold prices and the U.S. dollar have broken down. The ECB’s QE announcement, which indicates persistent low inflation, is also bearish for gold prices. The ECB’s move will spark demand for heavily-sold commodities and equities, the note says.

Crane notes that fundamental traders should exit the gold trade, while momentum traders might see opportunities for another four to six weeks.

The SPDR Gold Trust (ETF) (NYSE: GLD) traded recently at $124.17, up 1 percent.

Posted-In: Joel Crane Morgan StanleyAnalyst Color Commodities Markets Analyst Ratings