Gold price to fall to under $1,000https://gulfnews.com/business/gold-rate/gold-price-to-fall-below-1-000-in-coming-months-analysts-1.1632296
A rise in US Treasury yields to push gold price towards $900 per ounce or even below in 2016
Published: 14:20 December 6, 2015 By Cleofe Maceda, Senior Web Reporter
Dubai: The precious metal is set for more price weakness this week and in the coming months as the Federal Reserve is expected to adjust the interest rates for the first time in nearly a decade and the US dollar remains strong.
Analysts are expecting the price of the bullion to fall below $1,000 per ounce, while other metals, including silver, platinum and palladium, are seen to suffer some declines as well.
Georgette Boele, coordinator for foreign exchange and precious metals strategy at ABN Amro, said the upcoming Fed lift-off has put a pressure on the prices of the yellow metal because the divergence on what is paid on gold and on US dollars increases.
In an environment of optimistic investor climate, investors search for better yielding opportunities and assets that are sensitive to global growth. Gold as an investment asset does not hold these attributes. It is often in demand when investors worry about global growth (geo) politics, the US dollar and inflation, a so-called safe haven, Boele said in a note.
Gold collapsed to $1,046.43 an ounce on Thursday, the lowest since February 2010, but edged back up a bit the next day.
As of Sunday morning, 24-carat gold was retailing in Dubai at Dh130.75 per gram, up by Dh2 from 1st December . The price for 22K, 21K and 18K was set at Dh124, Dh118.50 and Dh101.50, respectively
However, the latest prices are still much cheaper compared to the highest recorded rate in October which was Dh141.50 per gram.
"We expect gold price to remain volatile with a downward pressure on price due to expected Fed interest rate increase," Karim Merchant, CEO and managing director of Pure Gold Jewellers, told Gulf News.
A report last week showed that the United States added more than 200,000 jobs in November, further fueling expectations of a rate increase and causing the greenback to rise.
Boele said an increase in US Treasury yields will push the gold price towards $900 per ounce or even below in 2016, mainly because of investor position liquidation.
We expect investors to continue to liquidate positions in the months ahead because of a higher US dollar and higher US rates. It is likely that new lows in prices will be reached before the end of the first quarter of 2016, she added.
Silver prices could drop to $13.5 per ounce while platinum and palladium prices could drop below $800 per ounce and $500 per ounce, respectively.