Gold prices to stabilise this year; no significant drop in demand expected
Dubai-UAE (Aug 16) Gold prices are likely to stabilise to above $1,100 an ounce, while physical demand for the precious metal won’t likely see a significant drop for the rest of the year, an analyst told Gulf News.
As of 11am on Sunday, gold’s retail prices in Dubai remained unchanged compared with a day earlier, at Dh134.75 per gram for 24K, Dh128.25 for 22K and Dh123 for 21K.
The global price of gold fell to its lowest in five years in July, at $1,088.050 an ounce, but it later rebounded to $1,121.40 last week. The latest official data also revealed that demand for the precious metal, including jewellery, bars and coins, slumped to its lowest in six years during the second quarter.
Rolf Schneebeli, CEO of Gold Services AG, a gold and investments advisory firm in Dubai, said it looks like the prices will hover around $1,150 to $1,200, adding that no significant drop in demand is likely to happen over the next few months.
The World Gold Council (WGC) confirmed that demand for the precious metal slumped to its lowest in six years during the second quarter, with acquisitions of gold bars and coins falling by 15 per cent in June compared to a year earlier. At the same time, outflows from gold-backed exchange traded funds (ETFs) slowed to a trickle – at less than 23 tonnes.
“The recent WGC figures show that the physical demand in India and China has been slow this year so far. It might remain slow in China until the devaluation and the fiscal stimulus take hold,” Schneebeli told Gulf News.
“This might be next year only but I hear positive opinions on India. So, I don’t think there will be another big drop in physical demand for the rest of the year and if the current level around $1,100 holds, I could imagine some stabilization [in the prices] in the range of $1,150 to $1,200 [an ounce] for the end of the year.”
Schneebeli noted that the risk appetite of many investors has increased and as a result, they have shifted their money to other investment options.
“The safe haven aspect in gold has been progressively dissipating over the last few months and years. Actually it’s a bit more than that as in a wider context one can say that the risk appetite of the investors has again increased and, therefore, a lot of investments were reallocated to the stock markets,” he said.
“This has of course led to a reduction in interest for gold positions in the western world as demonstrated by the reduced gold ETF holdings. It seems that the $1080 to $1100 level on the downsize is holding which would be a good signal for the Middle East jewellery clients to buy.”
Ole Hansen, head of commodity strategy at Saxo Bank, had said earlier that a strong US dollar, low global inflation expectations and the prospect of a Federal Reserve interest rate hike have all “conspired” to drive gold prices to a five-year low. More speculators are also betting that the precious metal will struggle to advance over the next few months.
Source: GulfNews
