Vang SJC

Yesterday, gold rose 0.3% despite the positive CPI data from the US.

While CPI rose 0.2% with forecasts, primarily commodity prices (excluding energy and food) rose 0.2% (0.1% higher than expected), but it seems that was not enough to reduce the appeal of gold. Also, it seems the market was too “tired” while awaiting the decision of the Fed to raise interest rates. At the same time the economists surveyed showed different views about the timing of the Fed’s rate hike. According to CMC Markets, investors are no longer worried much about Fed’s rate hike, suggesting that interest rates will rise only slightly in the next 12 months. According to one poll by Reuters, the leading banks on Wall Street said that Fed will raise interest rates as early as September. However, today at the Cleveland Fed president, Mester confirmed June is the appropriate time. When the Fed moves more and more difficult to predict, investors may want to return to gold.

Currently, gold is traded at $1,192.07/ounce at 5:40 GMT + 7.

Gold price is likely to surge because of the following reasons:

  • As predicted by CPM Group, gold price will rise rapidly. According to this group, even though the amount of gold purchased has decreased, it is still among the top 15 assets attracting the most investment since 1950 Additionally, central banks are constantly increase gold holdings in the past 5 years. Countries such as Kazakhstan, Tajikistan and Turkey continued to push up gold reserves this month. Russia is also expected to boost gold purchases to diversify its foreign exchange reserves.
  • In India who has the highest demand for gold in the world, the macro economy is recovering. Moreover, the gold import restrictions are being lifted. Estimates show that in March, India imported 150 tonnes of gold.
  • Tonight there will be information about U.S. durable goods orders. Predicted the index would rise 0.3%. If the data is weak than expected, it means that manufacturing activity is narrowed, reducing the number of jobs. This will negatively affect dollar and support gold price.

However, price may fall because of the following reasons:

  • If this indicator for positive data, which suggests demand is improving. Production seems to be expanding, creating more jobs. This will support dollar and hurt gold price. In addition, the prospect of the Fed raising interest rates this year (probably in June) will still cause gold price to fall.
  • According to CPM, gold demand in 2014 is 16.4% lower than 2013. This trend could continue in 2015 and pulled down gold prices.

Forecasting: Gold price will continue to rise to $1223.28.

Hanh Nguyen