Gold prices yesterday (30th March) went down 1% from $1,198.04 to $1,185.09. The main reason is that personal consumption data in the United States was 0.1% higher than the previous month (-0.2%). Core PCE price index (measuring the change in commodity price excluding food and energy) maintain at 0.1%. These showed that inflation in the US has improved, but not really significant. Pending home sales unexpectedly rose 3.1%, higher than the previous month. This is showing that US real estate market is improving. These have contributed to strengthen the possibility of Fed’s rate hike, helping dollar soar and pulled down gold price.
Currently, gold is traded at $ 1,1178.92 at 4:39 GMT+7
Gold price is more likely to fall due to the following factors:
According to the CFTC, gold net long positions fell by 9.9% to 31.653 contracts in both futures and options in the week ended on 24/3. This is the lowest level since December 2013. Number of bearish positions rose continuously for 7 days, up to 84.022, the highest level since 2006. So investors are increasingly selling gold and the trend may continue.
The data from the US economy in recent times including GDP, unemployment claims, personal spending, core PCE price index were relatively positive, showing the US economy is still growing at modest pace. This will support dollar and hurt gold price.
According to the French bank, Natixis, gold is likely to plunge to $1,150/oz this year. They said the demand in Asia, particularly in India and China will not be enough to push gold price up. Besides the central banks’ gold purchases aiming at backing national currency will not have significantly impact on the gold market.
Currency manager, Dominic Schnider, at UBS, Hong Kong, said the Fed will raise rate in September and the price of gold would be pulled down to $1.1050.
However, gold prices may increase again due to the following reasons:
According to Zero Hedge and Goldman Sachs, the world’s gold production will be exhausted in 20 years. But this problem is not the world’s attention but Goldman Sachs report can begin to attract attention. Concern about the scarcity of gold could push up gold price.
According to Standard Chartered Plc and Bank of America, gold may rise in 2015, to end 2-year of steady decline even as the Fed raised interest rates. Standard Chartered said: “The policy of monetary easing around the world, evolving geopolitical conflicts in the Middle East, decreasing tariff barriers in India, the demand of Chinese consumers, and the instability in the Euro zone will support the gold price. “
Finally, if CB Consumer Confidence index appear to be weak, the inflation outlook and ability to raise interest rates will fall. This will hurt dollar and gold price will rebound.
Forecasting: Gold price may go down to $1,170.06.