Gold price breaks out: how high can it go?
Commodity remains volatile as doubts grow of 2015 rates rise
The price of gold has definitively broken through what was seen as a key resistance level, setting the precious metal on a path to its first positive year-end finish in three years.
Bullion settled at around $1,188 an ounce on the Comex division of the New York Mercantile Exchange yesterday. It has since moved broadly sideways and was holding ground at around $1,185 in London this morning, still well above the $1,170 threshold at which previous rallies had floundered.
Bloomberg notes that the gold price is now above its 200-day rolling average for the first time since May, another bullish technical indicator. Prices were buoyed by weak US retail sales data that has added to the view that the US Federal Reserve will delay a rates rise into next year.
A number of analysts have predicted that a confident break away from persistent resistance would see a rise beyond $1,200 by the year’s end, signifying a positive move overall this year and the first annual increase since 2012. Daily FX and Saxo Bank have both pointed to targets of around $1,250 (see below).
But it’s not all plain sailing for gold and trading remains very volatile. Bullion had actually broken through the $1,170 mark earlier yesterday before falling sharply – and then rebounding back equally strongly after the retail data was released. Mining.com notes that trading volumes were around double the daily average.
According to Bloomberg, the key issue is whether the Fed will decide to raise interest rates before the end of the year. Of 41 economists surveyed, 21 still see gold falling from its current level resulting in a loss for 2015, a forecast based largely on the view that rates will be increased no later than December.
The two most accurate forecasters are at odds short-term, but with rates set to rise before long both see a bearish picture emerging before gold can embark on a more sustainable recovery.
Barnabas Gan at Oversea-Chinese Banking Corp has predicted that the gold price will fall to $1,050 if the Fed raises rates this year, but otherwise reckons it will end the year at $1,200. He says he would then need to review his prediction for the metal to fall to $950 next year.
Robin Bhar at Societe Generale is calling a price of $1,050 for the end of the year and $1,000 next year, whatever the Fed’s decision.
Source: TheWeek – Gold price breaks out: how high can it go?
