There is the short-term potential for the gold price to fall below $1,200 per troy ounce due to the high level of speculative interest and renewed Fed rate hike speculation, said Commerzbank in a report on Friday.
But the price is not expected to fall lastingly below this threshold because such a price level is likely to be viewed by investors as an attractive opportunity to buy, it said.
“What is more, lower prices should cause physical buying interest to pick up in Asia, as the consumer restraint exercised there in recent months has generated pent-up demand,” it added.
At present, there is also little to suggest that the interest in gold ETFs might wane abruptly or even switch to selling, it noted.
Real interest rates are negative in many cases and there are numerous uncertainties, for example about how the economy in China will develop, what will happen to the political landscape in Europe, and what the outcome will be of the autumn presidential elections in the US, it said.
In addition, it is by no means certain that the Fed will actually raise interest rates in June.
“After all, the Fed meeting will be taking place one week before the Brexit referendum, which could give rise to considerable market turmoil if a majority voted in favour of Great Britain leaving the EU. If polls suggest a close result, this could prompt the Fed to bide its time, in which case gold would rise again,” it said.
On expectations of two Fed rate hikes this year, Commerzbank said it will keep its gold price forecast for the year end unchanged at $1,250 per troy ounce.
The spot gold price fell to a 3.5-month low of $1,199.90 during Asian trading hours on Monday. It was last at $1,202.30/1,202.60, down $10.30 from Friday’s close.
Commerzbank sees the silver, platinum and palladium prices at $18 per ounce, $1,050 per ounce and $650 per ounce respectively at year end.
The spot prices of silver, platinum and palladium were recently at $15.915/15.935, $965/970 and $535/540 respectively on Monday.
The post Gold will not fall below $1,200/oz for long – Commerzbank appeared first on The Bullion Desk.
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Source: Bullion Desk News
