Vang SJC

Yesterday (7/7), gold fell to a near four-month low as the dollar rallied ahead of an emergency Euro zone summit on Greece.

During the session, gold prices hit a low of $1,147.17/ounce, then closed at $1,154.96/ounce, down 1.3% from the open price ($1,170.33/ounce).

Currently, at 3:30 p.m. GMT+7, the price of gold is at $1,153.16/ounce.

Today, gold may continue to go down, there are a number of reasons:

  • After the Euro summit, Greece has just a few days to give new proposals and the deadline will be Sunday. Thus, the door is still open for Greece to be a member of Euro zone. At this time, when there is no breaking news, gold does not have strength to fly.
  • Yesterday, the Greek finance minister Giorgos Stathakis said it is seeking financial support from the European Stability Mechanism (ESM). If ESM say “yes”, Greece will have money to cover debt and can stay in Euro zone. When Grexit scenario is not so “obsessive”, demand for gold as a safe haven will also cool off.
  • The European Central Bank (ECB) continues to promote QE. This action may pull Euro down, supporting dollar goes up, putting pressure on gold prices.
  • According to the latest IMF report, although the U.S. economy is sapped by a string of unfavorable factors in the first quarter, a continued expansion momentum remain in place. It predicts that U.S. GDP growth in 2015 will reach 2.5%. Recovery of the U.S. economy strengthens the possibility of Fed’s rate hike later in the year, putting pressure on gold in recent months.
  • China’s stock market continued to plunge, despite the supporting measures from the government. Within three weeks, 3.2 trillion dollars has been erased from the market. Today, the People’s Bank of China (PBOC) announced it would provide more liquidity and do anything to prevent systematic risk. It may have to sell gold in order to have enough money to save the falling stock market.
  • Gold fell in the past several days, egnored Greek debt crisis. Especially after yesterday’s sharp decline, investors will tend to “run away” from the gold market.

However, the gold price may increase, there are several reasons:

  • In top gold markets like China and India, demand for physical gold may rise while gold prices are relatively cheap.
  • Central banks may also increase gold reserves when prices are low.
  • These people believe that Grexit will happen can buy gold with expections that the precious metal will go up when the worst scenario comes.

Forecast: Gold prices are likely to fall toward $1.142/ounce.

Linh Nhan