Why Gold Price May Withstand Higher Interest Rates and a Strong Dollar

New York (July 2)  The July breakdown in the price of gold feels like the end of the last bullish hopes for the gold bugs. Or is it? The World Gold Council (WGC) is of course a pro-gold group, so it may not be surprising when you see them issue positive views on gold. Still, sometimes the group does have some caution and insight that is useful for bulls and bears alike.

The WGC’s outlook for the second half of 2015 aims to factor in the drop in the price of gold seen in the first half of 2015. The real issue is how the council sees higher interest rates and a strong dollar against gold ahead.

24/7 Wall St. would remind readers that gold’s last leg down has been in July, since the end of the second quarter. It cannot be ignored that there has been some serious technical damage done to gold’s long-term chart, with the move to under $1,100 per ounce now creating five-year lows. This needs to be kept in mind in the WGC’s outlook. Traders also will want to consider that the old support levels of $1,150 to $1,200 are now likely to be considered the new resistance levels by many traders.

24/7 Wall St. has even warned that gold prices may remain weak for some time now. In fact, or opinion, some are starting to think gold could go back and test the $1,000 per ounce mark. That might be another psychological blow to the shiny yellow metal. Now you can at least consider yourself warned, with at least some caveats to an outside bullish view.

While gold’s drop may be puzzling to some investors, the WGC’s view is that this is more consistent with market expectations that the risks the markets were facing could be contained. And as far as the coming interest rate hike or hikes by the Federal Reserve, the council said:

We believe that the gold price already reflects a possible rate hike later this year and that the US-centered perspective is missing a more comprehensive view of the market.

Source: 247WallStreet