Can Gold stay below $1,200 this year?
Gold traded narrowly throughout the past week, dipping below the $1,200 level for the first time in ten months before rising again, with HSBC saying in its latest forecast that “an expected US dollar rally that is seen to run into 2015 will keep precious metals prices pressured.”
The average price of gold this year has been downgraded by HSBC from a previous $1,292 to $1,265 per ounce, a 2.1% downward revision. The average silver price is reduced to the current forecast of $19.30 from a previous $19.50 per ounce.
While the strengthening USD of the back of expectations for rising Fed rates is seen as a key factor pressuring gold price in the longer term, analyst James Steel said that it is not the only factor.
“Many of the factors associated with a stronger USD are inherently gold-bearish. Gold’s decline cannot therefore entirely be blamed on a stronger USD,” Steel said.
Part of these factors is related to the gradual tapering of loose monetary policy in the US, which is pushing investors towards higher-yielding assets. Low inflation rates also reduces the inflation-hedge buying for gold. As well, flow of funds into the rising stocks markets are also depriving gold investments.
The bank however sees the $1,200 per ounce as a key level where the price is sufficiently low to ignite physical off-take.
FXTM’s Chief Market Analyst Jameel Ahmad added that last Friday’s US employment report came in much stronger than forecast and led to heightened suspicions that the Fed will look to raise interest rates sooner than expected. As such, Gold concluded trading on Friday below $1200 for the first time since December 19, 2013.
“Other than the FOMC Minutes, economic releases from the United States are low this week but the commodity still looks on track to reach the 2013 low ($1180.32) by the time the Fed concludes Quantitative Easing (QE) at the end of October,” Ahmad said on www.ForexCircles.com .
But the online SmallCap Network was more bullish on Gold, seeing it at much higher levels than present.
“Just because stocks may be stuck in a rut doesn’t mean every trading instrument is – there is a strong feeling that gold is poised for a big, upward moved now.
“Well aware that gold bulls are few and far between now, most of the so-called and self-proclaimed gurus expect gold to keep falling. They’re basing that expectation on gold’s current momentum. However, nothing lasts forever, and there’s a lot more money to be made by catching a reversal when it’s just beginning rather than chasing a trend that’s been in place for a while.
“But why do we think gold is poised to bounce when nobody else seems to agree? It’s mostly got to do with the value of the U.S. dollar, which has been THE key shortterm driver of gold for several weeks now,” it said on www.smallcapnetwork.com .