Precious metals traders say they expect a ceiling on gold around its current level or that it could move still lower due to an expected interest rate hike later this year by the U.S. Federal Reserve.
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” class=”local_link” target=”_blank”>gold market and with the Federal Reserve looking to hike rates in September it doesn’t look like gold’s weakness will end in the short-term”.
But an indicator which has been rather accurate over many years is this: The time to buy gold is when the last bull has left town.
“The Asian market missed the action on Friday when USA players were already attempting a break of $1,130, a major support level, and has pushed prices much lower today”, ABN Amro analyst Georgette Boele said.
Platinum prices also fell 5% to its weakest level since the financial crisis.
The drop came despite the fact that China, the world’s largest gold producer, announced on Friday that its reserves had increased by 59 per cent to 1,658 tons as of the end of June.
The latest drop in the gold price was also affected by Chinese investors selling a lot of gold.
Gold has been falling out of favour as the dollar strengthened last week after Fed chair Janet Yellen confirmed to congress that the central bank was on track to rise rates this year.
“If people would have seen higher gold demand from China, it would have helped prices”, said Ryan Case, head of institutional sales at Bullion Capital, a physical bullion exchange based out of Australia.
“Gold is a hedge commodity and people tend to invest in the yellow metal when the global economy is hit”.
Bloomberg reported that China’s gold purchases since 2009 were second only to those of Russian Federation, citing figures from the worldwide Monetary Fund. The country now ranks fifth globally in gold holdings.
In wider markets, the dollar hit a three-month high against a basket of currencies, making dollar-priced gold more expensive for holders of other currencies.
With Greece fading from the limelight, markets focused on the relative outperformance of the USA economy and nudged the euro near to its lowest in seven weeks at $1.0826.
But with the USA dollar increasingly gaining favour as a rate increase looms, gold faces still more downside risk.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange were down 1.45 percent to $1,114.60 per troy ounce as of 10:26 BST.
The dollar was firm in Asia Monday with investors focusing on the timing of a United States interest rate increase after debt-strapped Greece reached a bailout agreement with its creditors.
” class=”local_link” target=”_blank”>precious metals specialist at Natixis, said there is not a lot of positive news for the gold market”.
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Global gold prices are down 6.53% year-to-date, while Indian gold prices are down 6.65% in the same period. It was last up 0.8 per cent on the day.
