Experts see gold much lower because of interest rate hikes by the Fed, a new market correction in China, slow Indian demand and sales by central banks
Gold was put under strong pressure this week and sank to a 13-year low of about $1100 dollars per ounce. According to Morgan Stanley the market situation may become even worse. The bank experts do not exclude even a drop to $ 800 an ounce. It seems Morgan Stanley joined the gold bearish camp and same as many investors, one of which is Jim Rogers, expects a bottom below $1000 per ounce.
To get there, however, the US Federal Reserve should begin raising interest rates. Furthermore, there must be a new adjustment of the stock exchanges in China and sales of central bank reserves, says in a report quoted by Bloomberg, analyst Tom Price. According to the bank the metal is more likely to trade around $1050 dollars per ounce, which experts retained its earlier forecast of market movements in 2015
At the end of the Wall Street session on Thursday, the price of the yellow metal was $1094.10 dollars per ounce.
The interest in the precious metal sector retreated after FED’s possible interest rate hike which is preparing to increase borrowing costs, thus giving impetus to the dollar. According to Jeffrey Currie of Goldman Sachs Group Inc, the price of the metal may fall below $1000 dollars. Another metals trading bank, Standard Chartered Plc also announced it expects gold to continue its decline.
“Investor interest is very weak at the moment,” said Helen Lau, an analyst at Argonaut Securities in Hong Kong, according to which prices will sink further after the Fed take its course correction in rates. “Eventually they (the US central bankers – note. Ed.) Will increase the percentage this year.”
Fed Chairman Janet Yellen confirmed last week that the central bank will raise borrowing costs this year. Most economists predict that the move will be taken in September, the second most frequently mentioned as a possible month is December.
India and China are the world’s top gold buyers and, after massive selling on the Shanghai Gold Exchange on Monday helped drive down gold prices by 4 percent to a 5-year low, traders hoped demand would perk up in India, or elsewhere in Asia reported Reuters.
But that is probably not going to happen. Not this time. India accounts for more than1/5 of the global demand, but its gold appetite now remains sluggish, with only modest local premiums to the global spot benchmark.
“That’s really a bearish sign, when the main consuming region remains on the sidelines after such a price drop to a multi-year low,” Commerzbank senior oil analyst Carsten Fritsch told the Reuters Global Gold Forum on Tuesday.
“There was a bit of buying and then no more inquiries. Gold prices are dropping, dropping, dropping – so people don’t want to buy for the time being,” Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong, said on Tuesday.
All this probably sounds good to contrarians, as its difficult to find positive market participants, but we at Octafinance always suggest to respect the trend. The trend for now is down!
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