Gold News: Gold Price Bounces Back

Gold News

Gold News

On Wednesday gold looked like it would take badly, the announcement of the first US interest rate hike in nine years. On Thursday, the metal got hit. Today, it’s bouncing back.

On Friday gold futures with February delivery dates gained 1.5% or $15.70 from yesterday’s close to trade at $1,065.00 midafternoon in another day of heavy volume on the Comex market in New York. Gold was recovering from its lowest level since October 2009 below $1,050 struck yesterday.

The Federal Reserve’s 0.25% hike from ┬ánear zero where it’s been since December 2008 has been expected for a while and the central bank also said given current economic conditions, interest rates are only likely to increase in a “gradual” way.

Higher interest rates boost the value of the dollar and makes gold less attractive as an investment. US Treasury yields and the gold price have a strong negative correlation and a stronger dollar has an even closer inverse relationship to commodity prices in general.

A new research note by ABN Amro says this relationship will continue to put pressure on the gold price going into 2016.

Georgette Boele, Co-ordinator FX & Precious Metals Strategy at the Dutch bank said while quiet trading over the Christmas and New Year period would limit the downside, “investors will continue to liquidate positions in the months ahead because of a higher US dollar and higher US rates:”

“As a result, new lows in prices could be reached before the end of the first quarter of 2016. We expect gold prices to break below USD 1,000 per ounce in the coming months. Silver prices could drop to USD 13.5 per ounce while platinum and palladium prices could drop below USD 800 per ounce and USD 500 per ounce, respectively.”

ABN Amro sees gold at $900 before the end of 2016, before a recovery to above $1,000 by the end of 2017.

 

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