Vang SJC

Yesterday (29/7), gold prices edged up but still near the lowest of 5.5 years due to the FOMC statement after the Fed two-day meeting.

Ending the session, gold prices closed at $1,096.15/ounce, up 0.1% compared with the open price ($1,094.93/ounce).

Currently, at 15:25 p.m. GMT+7, the price of gold is $1,085.99/ounce.

  • Following a two-day policy meeting on Wednesday, Fed said it felt the economy had overcome a first-quarter slowdown and was “expanding moderately” despite a downturn in the energy sector and headwinds from overseas. This statement strengthened the possibility of Fed’s rate hikes in September. Therefore, the dollar went up, while gold remained under downward pressure.
  • Today (30/7), the U.S. will release the first estimate of second-quarter U.S. gross domestic product. This is an extremely important indicator that investors are anxiously waiting to get the timing of Fed’s actions. the world largest economy is expected to grow 2.6%, after the disapointing first quarter. According to a Reuters poll last week, most economists predicted U.S. GDP will improve in the second quarter.

Good data will strengthen a rate hike in September, adversely affecting non-yielding assets such as gold.

In addition, there are number of negative factors that may pull gold down such as:

  • Global stock markets rallied as earnings topped forecasts and the Federal Reserve said the labor and housing markets are improving. Cash flow may rushing into stock markets, instead of gold.
  • 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.
  • Pessimism still surrounds the gold market. Greece fears have faded, gold demand in the world’s largest consumers like China and India do not prosper, “ignoring” the attractive price. Meanwhile, prospects of the Fed’s rate hikes have still put pressure on gold prices in recent months.

However, gold prices may increase due to:

  • Contracts to buy previously owned U.S. houses unexpectedly fell in June after five straight months of increase, suggesting some cooling in home resales activity after recent hefty gains. This could be a signal that the U.S. economy hasn’t enough strength to take a rate hike. This news is good for gold prices.
  • A pickup in monsoon rains, along with a fall in gold prices, is expected to drive purchase of the yellow metal in India, the world’s biggest consumer. Somasundaram PR, managing director, World Gold Council’s India operations said that, demand for gold jewellery, coins and bars is expected to increase to 900-1,000 tonne in 2015 from last year’s 842.7 tonnes.
  • Gold demand may rise as gold prices are relatively cheap.
  • If the U.S. GDP isn’t good as expected, the dollar may decrease, pushing gold up.

Forecast: the gold market may have much volatility in early U.S. session, the main trend is bearish. Prices may pop up to $1,103/ounce then going down, towards the price $1.078/ounce.

Linh Nhan