Can Gold stay be­low $1,200 this year?

Financial Mirror (Cyprus) - - FRONT PAGE -

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.ForexCir­ .

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.small­cap­net­ .

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