Vang SJC

Yesterday (27/7), gold prices slipped as pessimism is still hanging over the market and investors are awaiting the Fed’s next meeting on 28-29 July for clues about the timing of rate hikes.

Ending the session, gold prices closed at $1,093.68/ounce, down nearly 0.5% compared with the open price ($1,098.83/ounce).

Currently, at 4:30 p.m. GMT+7, the price of gold is $1,095.67/ounce.

Today, investors are awaiting the Fed’s next meeting in 28-29 July. According to many experts, the Fed statement will not have much changes compared to the June meeting, in other words, the Fed may not rise interest rates in this meeting. Therefore, gold prices may go up in the next few days.

However, today, gold prices could fall because of the following reasons:

  • Chinese stock market fell more than 8% on Monday (27/7), in spite of the interventions from the Government. Tom Demark, the founder of Demark Analytics, China Securities said that, Chinese stocks may continue to fall 14% more in the next three weeks. On Monday, China announced industrial profits fell 0.3 percent in June from a year earlier, after data Friday showed a private gauge of manufacturing dropping to a 15-month low. It showed that China’s economy is becoming worsen. Global commodity markets have also been affected, as China is one of the world’s biggest consumer. The slump in commodity prices pulls inflation down. Therefore, the appeal of gold fell sharply, because gold is always a “best friend” of inflation.
  • Net imports of gold from Hong Kong into China fell to the lowest level in nearly one year, a sign that demand in the top gold consumer is sliding. According to Bloomberg data, the net long on gold went down from 67.9 tons in June to 22.1 tonnes in July.
  • Greek crisis: Today (28/7), Greece and international creditors will start the negotiation about the new bailout. International creditors want Greece to conduct the third reform before getting a new bailout. Now, when there is no breaking news, Greek concerns have fade, so the appeal of gold as a safe-haven asset also decreased.
  • Fear of deflation has returned to the global market, as the slide on oil and commodity markets that set off a deflation scare last year has resumed with a vengeance. In this time, the appeal of gold usually goes down, because the precious metal is often regarded as a hedging tool against inflation. Actually, investors are shifting to bonds as a safe haven, instead of gold.
    On Monday (27/7), HSBC lowered its gold price forecast in 2015 and 2016 to $1.160/ounce and $1.205/ounce respectively, compared to $1.234/ounce and $1.275/ounce earlier. This institution said that, gold is likely to hit $1,000/ounce before recovery.
  • Last week, although the dollar fell consecutively, gold still slipped, even when prices were relatively cheap. In overall, the negative sentiment is pervading, investors is anxiously waiting for breaking news before returning in the game.

However, gold prices also likely to rise as a result of several factors:

  • Greece worries have fade, giving the euro momentum, putting pressure on dollar, which may make the price of gold go up.
  • Today, Asian stocks slipped after Chinese stocks slumped yesterday, risk aversion sentiment remains. Dollar is under pressure because the uncertainty in China makes investors look to the yen as a safe haven. Now, many investors are looking to gold as a hedging intrument.
  • Gold demand may rise as gold prices are relatively cheap.

This evening, The U.S. will release flash PMI service, CB customer confidence and Richmond manufacturing index. Good data supports dollar, making negative impact on the gold prices, and vice versa.

Forecast:  Gold may go down toward $1,086/ounce.

Linh Nhan