Bullion, after being pummeled for the past couple of weeks has started fighting back with a clear rebound from its falling prices. Gold hit a 3 year low of $1,180.50 on last Friday, June 28, which is the lowest since August 2010. But, after touching a 34 month low point, bullion rose sharply to post a 2.8% gains on the same day.

Furthermore, gold has extended its uptrend for a third continuous session signaling a clear rebound with an additional 1.5% gain yesterday. The spot bullion climbed by as much as 0.7% to $1,260.90 an ounce in Singapore on Monday. Meanwhile, the U.S Gold edged up by $2 to trade at $1,257.90 around 03:18 (GMT).  

On the other hand, the Shanghai Gold futures posted gains for the second straight day, with the prices trading at a $30 premium to the Spot gold prices. This rise came after it had declined consecutively for nine previous sessions. Also, the volume for the Spot Bullion of 99.99% purity,trading in the Shanghai Gold Exchange increased from 14,660 kilograms on Friday to 15,978 kilograms on Monday.

Gold had recently plunged by as much as 23% in the second quarter. This was due to investors panicking about the Fed and Bernanke’s comments that indicated at a possible tapering of the $85 billion/month bond buying policy. Gold that is always seen as hedge against the inflation lost its sheen due to the Fed’s positive outlook of the U.S. economy.

This sudden rebound in gold can be attributed to the increased demand from Chinese buyers who wanted to snap up the Gold that had plunged to a 3 year low. Also, the Chinese Final PMI index for June reading at 50.1 signaled at slight economic expansion, casting a positive effect on Gold demand. The mixed U.S economic data has also created further uncertainty about the Fed’s possible tapering of its asset purchase program.

Moreover, the riots in Brazil and the military unrest in Egypt have pushed the investors to again seek Gold as a safe haven against uncertainties. All of these might have caused the short rally in Gold prices.

However, the experts and analysts still feel that the fundamentals of Gold are still weak.  And the bullion is predicted to decline by as much as 25% by the year end, its biggest fall since the year 1981. Though there seems to be some physical demand, it is not as potent as the one in April to stave off any further decline in Gold. A lot depends on the upcoming economic data like the U.S payroll data, which is expected later this week.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.