Vang SJC

On Monday (8th June), gold witnessed a slight gain after slipping string consecutive 3-day lows of 11 weeks. During yesterday’s session, gold rose to a high of $ 1,177.41/ounce, then closed at $ 1,171.49/ounce.

Currently, gold is at $ 1,181.85 an ounce.

Today, the price of gold is likely to edge up under the impact of the following factors:

  • In Asia: China’s Consumer Price Index (CPI) in May rose 1.2% compared to the same period last year, while production price fell 4.6%. As predicted by Reuters, China’s CPI rose 1.3% will be lower than the 1.5% increase in April, the producer price index is expected to decrease 4.5%. The recent data from China, including industrial output and retail sales were below expectations. Signs of economic slowdown world number 2 will increase the appeal of gold as an asset class risk precaution.
  • In Europe: Talks on the Greek issue is facing deadlock. International creditors criticized the attitude of the Greek government who has not agreed with the creditors’ demand. If the two sides continue to disagree and can not come to an agreement, the possibility of Greek default and leave the Euro zone will loom, leading to political uncertainty. Therefore, many investors will look to gold as a heaven assets.
  • Executive member European Central Bank (ECB) Liikanen said QE may last for until 9/2016. We can see Europe is still rely on the package. In the context of economic instability, gold will be more attractive.
  • According to a survey of the Business Roundtable for second quarter, the Managing Directors (CEO) in the U.S. showed little optimism of US economic outlook in 2015. Only a small number of them expected investment, employment and revenue will prosper in this year. The CEO expects U.S. GDP reached 2.5%, lower than estimates in the first quarter survey. Signs slow recovery of the US economy would reduce the likelihood of the Fed raising interest rates sooner, thereby supporting gold prices.
  • On Friday, gold slipped dramatically after non-farm payrolls. Many investors are now able to take this opportunity to buy gold, with expectation that price will rise in the future.

However, the price of precious metals may also be going down by a number of reasons:

  • In Europe: first quarter GDP figures Euro zone area was announced today (9/6) quite positive. According to the EU, GDP growth quarter after revised 0.4% maintain. Household consumption increased by 0.5%, 0.8% higher investment and exports rose 0.6%. When the region’s economy go up, people tend to reduce hoarding gold for safety purposes.
  • Greece launched a new proposal to creditors. Lenders are still considering the proposal on, this can bring hope to the Greek impasse, thereby reducing the appeal of gold as a heaven assets.
  • In the first week of June, the total holdings in gold-backed ETFs has fallen by 9.5 tons, which means investors are abandoning the precious metals.
  • HSBC and Barclays observed that gold will go down further, due to pressure from the prospect of the Fed rate hike and declining demand for physical gold in the Asian market. The two institutions said that gold price may slide down to $1,150/ounce, or even lower, before it went back up.
  • In Asia: China’s stock market is overheating, attracting more and more capital. People tend to sell gold and pour money into the market hoping to earn more profit.
  • In India, investors are withdrawing investment from gold-backed ETFs, as CRISIL research report said. Total assets in these funds have plunged by 1.9% to 66.88 billion rupees, due to investors’ withdrawal because of the decrease in gold price recently. India is one of the biggest gold market in the world, the decreasing demand may negatively affect gold price.

Forecasting: Gold prices likely to rise to $ 1.187/ounce.

Hanh Nguyen