Nomura Explains Why Gold Went Down, And Why It Is Going Back Up

http://www.zerohedge.com/news/nomura-explains-why-gold-went-down-and-why-it-going-back

Conclusion

We have seen that gold’s recent fall has been accompanied by heavy deprecation in Asian hours. This contrasts with relatively robust Asian price action during earlier periods of gold weakness in May and August. We think that a reversal of this trend back to gold appreciation in Asian hours is the key to a short term reversal and we have begun to see this in recent days. We also find that the correlation between risky assets and gold has been higher than usual in recent weeks. Hence, we suggest that heavily extended speculative net long gold positions have unwound to free up cash for other losses in risky assets, like equities. With short-term speculative positioning net longs at relatively low levels, it is likely that fundamentals, as opposed to positioning, are likely to drive the price of gold again.

We continue to view long-term fundamentals, such as low real rates and the relative cheapness of gold when viewed from an Asian perspective, as bullish for gold. At the same time, gold’s attractiveness as a tail-risk hedge against the continued uncertainty in Europe is likely to be another factor that should support the price of gold in the short term.