More gold price drops expected this week

December 4, 2016

Dubai-UAE (Dec 4)  Gold could continue to be under pressure this week as the US Federal Reserve is set to adjust the interest rates once it wraps up its meeting in the next few days.

The retail price of gold has so far lost more than Dh15 in value per gram in less than one month, or since the wake of the November 2016 US elections. As of Sunday, 24-karat gold in Dubai was trading at Dh142.50 per gram, down by Dh15.50 per gram from November 8.

The precious metal has been losing its shine on expectations that the new US president’s leadership could trigger interest rate increases due to fear of inflation.

Investors have consequently moved away from safe-haven assets as the US dollar, stocks and bond yields rose. For the coming week, the majority of analysts polled in a gold survey said they are pessimistic about a gold recovery.

“A key technical support level in gold was broken, and this further reduced the attraction of holding precious metal, at least in the short to medium term,” noted Ole Hansen, head of commodity strategy at Saxo Bank.

"Strong US dollar and expectation of multiple interest rate increase by [the US Fed] are two of the most overpowering factors which will keep gold prices under pressure [this week," Karm Merchant, managing director of Pure Gold Jewellers, told Gulf News.

He said the constitutional referendum in Italy, scheduled on Monday, is also likely to have a bearing on gold's volatility.

The total holdings of gold in exchange-traded products has dropped by 141 tonnes, with daily reductions seen since November 9, according to Hansen. Gold’s breaking below $1,172 per ounce could be an indication that the metal’s uptrend since last December is on hold or over.

“We believe that plenty of gold negative news has by now been priced in, but until ETP flows and bonds stabilise, the market will struggle as rallies will be met by sellers reducing exposure,” said Hansen.

A recent survey conducted by Kitco showed that nearly six in ten (58 per cent) of retail investors are not bullish about where gold is headed this week.

Source: GulfNews

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