Gold tumbles lower as markets mull Greece implications
Gold moved lower despite the uncertainty sparked by the sweeping victory in Greece’s elections for the far-left, anti-austerity party Syriza.
Its populist pledge to reverse austrity and refuse to pay the country’s debts presents a challenge to the leaders of the Eurozone, but the calm response of stock markets suggest investors expect some kind of compromise.
Spot gold was around US$11 lower at US$1,282 per ounce shortly after markets opened on Wall Street.
That makes a gain of about 10% so far in 2015 but that may be the metal’s lot this year, JP Morgan has suggested.
The US broking heavyweight expects the metal to ease lower, though it still sees value in some of the miners, especially in Africa where the Johannesburg Stock Exchange’s gold index has risen by 30% so far.
JPM’s view is that further gains for gold are likely to be tempered by the possibility of a rise in the US dollar and US interest rates.
It expects the price to average $1,233/oz in 2015. The split will be 1,300/oz in the current quarter and $1,210 for the remaining nine months.
In the broker’s view, 2016 will see another small decline to $1,200/oz as US interest rates start to rise.
JPM adds that the recent rise in gold reflects heightened investor anxiety. Even before the Swiss National Bank’s decision to end the euro/Swiss franc floor, the metal was trading nearly 7% higher, it notes.
But headwinds remain, such as a continually appreciating US dollar, persistent concern that the drop in oil prices may turn disinflation into deflation and the potential for softness in Chinese and European economic growth.
Over the long term, JPM’s real gold price assumption remains $1,400/oz based on the industry’s all-in cost of production.