Vang SJC

Gold rose on Wednesday (8/7) as the dollar softened, the tumble in Chinese stock markets and the unfolding Greek debt crisis.

During the session, gold prices peaked at $1,164.55/ounce, then closed at $1.158/ounce, up 0.25% compared with the open price ($1,155.13/ounce).

Currently, at 4:44 p.m. GMT+7, gold is trading at $1,162.8/ounce.

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

  • In early morning today, FOMC minutes were published. In June meeting, officials said that they needed to see more signs of a strengthening U.S. economy before raising interest rates. As a result, the dollar slipped, however, gold prices failed go up. It seems that the negative sensiment still dominates in the gold market.
  • Indian people are running away from gold and turning into the stock market. According to the Association of Mutual Funds in India (AMFI), gold exchange traded funds had total outflows of 2.3 billion rupees in the quarter to June. Gold prices in Indian rupees have dropped 7.2 percent over the past year. Meanwhile, mutual funds’ inflows reached a record 370 billion rupees in quarter II/2015.
  • Yesterday, the Greek finance minister Giorgos Stathakis said it is seeking financial support from the European Stability Mechanism (ESM). The government is trying to rescue the country from default and the threat of leaving Euro zone. Thus, the door is still open for Greece. At this time, when there is no breaking news, gold does not have strength to fly.
  • Yesterday, chairman of the Fed in San Francisco John Williams said he still expected the Fed will raise interest rates this year. He showed little pessimistic about the threat from the China and Greece issues. The prospect of a rate hike will put pressure on gold prices.
  • China’s stock market continued to plunge, despite the supporting measures from the government. Today, more than 1,400 companies have halt trading for fear of being sold off. Money are “trapped” in the stock market, cause many investors fall into poverty, and also affect cash flows into other assets such as gold.

However, gold prices may also rise, there are several reasons:

  • When gold prices are low, many investors will take the opportunity to buy the precious metal with expections that the price will increase.
  • In China, the stock market is slipping, investment flows may shift into other assets such as gold.

Forecast: Gold prices are likely to fall toward $1.150/ounce.

Linh Nhan