Vang SJC

Yesterday (1st June), the price of gold jumped to $1,204.31/ounce, but then declined and closed at $ 1,188.79/ounce mainly because of U.S. mixed data.

Currently, gold is traded at $1,191.13/ounce.

Today, gold price is likely to edge up because of the following reasons:

  • Demand for physical gold in Germany, the largest economy in Europe grew 20% in the first quarter in 2015, reaching 32.2 tons, exceeding both Switzerland (13.8 tons) and the United States (9.9 tons). This trend will probably continue. This country is hoarding more gold to prevent the upcoming political changes, if the Greek situation worsens.
  • Greek debt crisis: Greece’s Labor minister, Panos Skourletis today said Athens could not agree with the reforms. Negotiations has not reached breakthrough. If no agreement is reached in time, Greece may face default and leave the Euro zone. As a result, gold is favored as a safe heaven.
  • As announced by the Ministry of Finance, Government of India has reduced gold import tariffs from $398/10 grams to $385/10 grams. This action can stimulate demand world’s biggest gold consumer.
  • In Europe, CPI in May was 0.3%, higher than the previous month (0%) and exceeded the expectations of economists (0.2%). It seems that inflation has started to rise in the region. So gold may be more attractive because the precious metal has always been a tool to hedge against inflation.

However, gold prices also have the ability to “slide” for the following reasons:

  • US economy is showing signs of recovery in the second quarter. Although private consumption rose only 0.2% in April, lower than the previous month’s 0.5%, but according to a report by the ISM manufacturing index increased from 51.5 to 52.8 last month. At the same time construction spending also hit their highest level in six and a half years. The positive strengthen the prospect of Fed’s rate hike and negatively affect gold price.
  • Greek drama: This morning, the international creditors said they would intensify talks with Greece, in order to help the country cope with the difficulties. If talk achieves progress, gold will be less attractive than the yield-bearing assets.

Forecasting: Gold price is likely to go up to $1.1210/ounce.

Hanh Nguyen