Mo­bius says gold will gain in 2017 as Fed goes slow on rate in­creases

China Daily (USA) - - BUSINESS - By BLOOMBERG

Gold is set to ad­vance by as much as 15 per­cent be­fore the end of next year as theUS Fed­eral Re­serve goes slow on in­creas­ing in­ter­est rates and the dol­lar re­mains sub­dued, buoy­ing bul­lion de­mand, ac­cord­ing to Tem­ple­ton Emerg­ingMar­kets Group.

“The Fed is go­ing to in­crease the rates by a lit­tle bit, but not ex­ces­sively, and there is no guar­an­tee that a rise in in­ter­est rates will put peo­ple off,” ex­ec­u­tive chair­man Mark Mo­bius said in an in­ter­view at a Bloomberg event in Mum­bai. “A lot will de­pend on the real rates.”

Bul­lion has ral­lied 19 per­cent in 2016 as con­cern over the health of the global econ­omy, loose mone­tary poli­cies and the UK’s vote to leave the Euro­pean Union fanned de­mand. Af­ter rais­ing rates last De­cem­ber for the first time in al­most a decade, Fed pol­icy mak­ers have stood pat on bor­row­ing costs in the six meet­ings since. While the dol­lar gained to the high­est level since March on Fri­day on spec­u­la­tion that rates may soon climb, it re­mains lower this year.

“The US dol­lar is not that strong and may even de­cline,” said Mo­bius, who also high­lighted prospects for in­creased cen­tral bank buy­ing of bul­lion. “So if that hap­pens, gold gets more ex­pen­sive.”

Gold for im­me­di­ate de­liv­ery traded 0.2 per­cent lower at $1,263.48 an ounce at 9:30 am in Sin­ga­pore af­ter ris­ing last week, ac­cord­ing to Bloomberg generic pric­ing. It surged to $1,375.34 in July af­ter the af­ter­math of the Brexit vote in the UK, the high­est sinceMarch 2014.

While Fed funds fu­tures show the odds of a rise in De­cem­ber have climbed, in­vestors are still plow­ing funds into gold-backed ex­change-traded funds, with hold­ings at the high­est in more than three years last week. The prob­a­bil­ity of a De­cem­ber hike is about 68 per­cent, from 59 per­cent at the start of the month.

Mo­bius’s fore­cast for a higher gold price in 2017, even as the Fed pro­ceeds to raise rates, is sim­i­lar to the out­look from par­tic­i­pants at last week’s Lon­don Bul­lion Mar­ket As­so­ci­a­tion con­fer­ence in Sin­ga­pore. Bul­lion will trade at $1,347.40 in a year’s time, ac­cord­ing to a sur­vey of peo­ple at the gath­er­ing.

Fed­eral Re­serve Bank of San Fran­cisco Pres­i­dent John Wil­liams said on Fri­day he’d sup­port one in­ter­est rate in­crease in 2016 and a few more next year. Cen­tral bank of­fi­cials next meet be­tween Nov 1-2, the week be­fore theUSpres­i­den­tial elec­tion, anda­gain in mid-De­cem­ber. Wil­liams — who doesn’t vote on pol­icy this year— also said he would have sup­ported a Septem­ber in­crease.

The Fed is go­ing to in­crease the rates by a lit­tle bit, but not ex­ces­sively, and there is no guar­an­tee that a rise in in­ter­est rates will put peo­ple off.”

Mark Mo­bius,

ex­ec­u­tive chair­man of Tem­ple­ton Emerg­ing Mar­kets Group the trad­ing price of an ounce gold for im­me­di­ate de­liv­ery in July

DAILY CAO BOYUAN / FOR CHINA

Cus­tomers choose gold ac­ces­sories at a gold re­tailer store in Bei­jing.

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