Physical gold buying saw a significant upsurge last week after prices slumped in the wake of global concerns. “I was resigned to the fact that the physical buying in our market (Dubai and UAE in the wider sense) had finished for the year, and then came Thursday, 15th December. We saw excellent buying from customers which reminded us very strongly of the heydays in August/September,” Gerhard Schubert, Head of Precious Metals at Dubai-based Emirates NBD, said in his weekly precious metals report.

Spot gold prices closed last week at below $1,600 per ounce, down $111, or 6.5 per cent, in a week on a lack of more quantitative easing from the US Federal Reserve and the dash for cash as the European sovereign debt crisis drags on.

As expected, a number of analysts climbed out of the woodwork to call the end of the metal’s bull-run. Economist Dennis Gartman says he is out of gold, seeing “the beginnings of a real bear market, and the death of a bull.”

In his Gartman Letter published last Tuesday, Gartman warned that the incredible run-up in gold over more than a decade appears to be at an end. He noted that China has been buying gold aggressively over the past several weeks, which should have sent the price surging.

“Instead they plunged,” the publisher wrote. “One of the oldest rules of trading is simply this: A market that cannot or does not respond to bullish news is a bearish market not a bullish one,” he said.

As for gold’s future direction, Gartman is categorically bearish. “Lower, we fear and perhaps decidedly so. So much damage has been done to the psychology of the market in the past week and so many late longs have been caught off guard that we think wholesale liquidation … and perhaps forced liquidation … shall be the outcome,” he said.

Emirates NBD’s Schubert agrees with Gartman on the liquidation factor playing a major role in last week’s decline. “The ferocity of the liquidation seen last week took me by surprise, but the relatively thin market conditions lent themselves to extraordinary moves,” he said.

Part of Gartman’s predictions came true later last week, when spot gold prices slumped as low as $1,572 per ounce before inching back up a little until $1,598.46 per ounce. “We can imagine gold trading back toward … $1475-1525. It really won’t take much to push it there. Panic liquidation would do so rather swiftly. We’ll simply stand aside from the gold market then, preferring to be long of gold and not wishing really to be short of it. The sidelines seem the cosier of the two,” he opined.

But Emirates NBD’s Schubert does not share Gartman’s pessimistic opinion on the future price of bullion. “There are quite a lot of analysts and commentators who are predicting the end of the bull market, but we do not subscribe to this scenario, at least not yet. The situation in the US, and more importantly in the Eurozone, will stay relevant for some time to come. The world economic picture looks a little brighter, but the looming recession in the Eurozone makes it difficult to view this as more than a temporary phenomenon,” said Schubert.

“We saw our second-best single day last Thursday and I am encouraged to applaud our customers, who obviously view the prices under $1,600 as a bargain,” said Schubert.

Dubai’s Emirates NBD holds a neutral outlook on gold, and sees support levels between $1,535 and $1,562 per ounce, while believes it will meet resistance between $1,640 and $1,665 per ounce.

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