Gold in a state of confusion

Since the start of January, the silence in the global gold market is becoming a matter of concern for gold-loving investors around the world.
Although gold prices have remained volatile, the metal witnessed a downward trend in January. The price of gold, after strengthening by around 25 percent in 2010, has lost around 4 percent since the start of the current calendar year.
The SPDR Gold Trust, the worlds largest gold-backed exchange-traded fund, has been seeing outflows - with gold holdings falling to around 1,228 tons by February 4, from 1,280 tons as of December 31.
The price of yellow metal has eased on account of progress in the US economy, where improvement in economic indicators is assuaging fears of a double-dip recession.
US consumer confidence has also improved in January, as the Discover U.S. Spending Monitor, a monthly index of consumer spending intentions, jumped a record 5.6 points in January to 93.1, the highest level of confidence since November 2007.
Moreover, the reduction in US unemployment rate, to 9 percent in January - its lowest since April 2009 - along with improvement in the US manufacturing sector will continue to keep the pressure on gold prices.
However, many metal analysts still hold an optimistic outlook on gold, expecting the metal to gain support on the back of inflationary pressures, as factors which were responsible for the gold rally in 2010 are still present.
"Most of the factors that led the gold price higher over the last two years, such as the global financial crisis, a weak US dollar, less scrap supply, official sector buying and geopolitical tensions in specific regions, just to name a few, shall continue to prevail in 2011," MKS Finance, a Geneva-based trading house, said in a note released at the beginning of the current year.
Last month, metals consultancy GFMS, also predicted gold to reach $1,600 an ounce in late 2011 and early 2012.
Amid mixed economic indicators and a world that has not fully recovered from its worst slump, the market is likely to continue to adopt a wait-and-see strategy until the time investors start seeing a major change in global economic indicators. For gold investors who have developed close affinity with the metal during the past few years, its surely a tough game of patience. The main worry in this case is that patience may not yield its promised fruits.