NEW YORK (Kitco News) - It was a one-way market Monday as gold prices ended the U.S. day session about where they started -- solidly lower. However, one chief executive officer is not worried about the close to 2% dip.
'We have had a spectacular run and it is healthy to have a correction,' said Frank Holmes, CEO of U.S. Global Investors, a Texas-based investment management firm.
Profit-taking pressure from recent gains, a higher U.S. dollar index and a generally improving risk sentiment in the world marketplace are all working against the safe-haven metal.
The yellow metal slipped as much as 2 percent on Monday but prices managed to remain above $1,200 an ounce after a rally that pushed prices to one-year highs this month. Gold has outperformed most assets so far this year with a 15% gain.
Spot gold was down 1.6% at $1,208.60 an ounce by 1:58 p.m. EDT, off a session low of $1,201.63. April Comex gold was last down $20.30 at $1,210.40 an ounce. March Comex silver was last down $0.288 at $15.085 an ounce.
'Gold is up two standard deviations...[S]o math is in favor of a correction short term,' Holmes said in an interview with Kitco News. 'Historically we get a pop in gold for the Chinese New Year - if we go back just one month ago, gold was down one standard deviation. The markets will correct,' Holmes stressed.
On the topic of Goldman Sachs' recommendation of shorting gold, Holmes, said the bank is 'brilliant.' '[T]hey always come out when gold is up two standard deviations and say 'sell'; it is a very biased position, but they are smart when they come out and say it's time sell gold.'
In other news, the British pound was under sharp selling pressure Monday as London's mayor has come out against the U.K. staying in the European Union. There will be a referendum held on the matter in June. Holmes said that any currency uncertainty will be bullish for the yellow metal.
'We are witnessing strong gold buying in London. And last year when gold fell over sixty trading days, one standard deviation, guess what? Gold buying went to record levels. So a possible 'Brexit' is positive for gold,' Holmes explained.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.