Gold price at a critical point
News24Wire reported that Mr Wichard Cilliers, director and chief dealer at treasury services company TreasuryOne, said on Monday that gold is at a critical point at the moment, with all of the direction in price being influenced by what the US Federal Reserve is going to do next month. By late morning on Monday gold was trading 0.56% down on $1 071.80. This is 7.47% down on its price a month ago, 10.62% down on its price six months ago and 20.40% down on its price 5 years ago.
He said "The sentiment is 'gold negative' at the moment, and it seems that the momentum is holding. Gold's rand price is still looking attractive at R15 000 per fine ounce and could be a good level to hedge in the short term.”
He explained that gold is in the firing line because of the anticipated interest rate hike by the Fed in December. Mr Cilliers said this happens because non-yielding metals like gold become less attractive for investors should there be yield to be had in a country like the US. He said "With this in mind and the last Fed minutes that had a hawkish tone and suggested that the Fed will hike in December, gold is in the firing line to break lower.”
He emphasised that it certainly is not a given that the Fed will indeed hike in December, as some dovish members are still casting doubts on whether it is wise to hike. He said "Should the Fed not hike in December, it will show the market that they have been bluffing all the time and will not hike in the foreseeable future. This will inevitably lead to a gold rally and see gold surging in the short term. Should the Fed, however, keep their word, then a run to $1 030 can be expected.”
Cilliers added that, after what he sees as an impressive showing, copper is "being scolded again" with the price dropping to a six-year low. He said "The red metal is trading well below the $5 000 per tonne level, with the current price at $4 630. Since May, copper has lost about 25% on the back of the stronger dollar and the Chinese slowdown, keeping the demand for copper down.”
The continued slide in the gold price is almost reversely correlated with the probability of a US Fed rate hike. The fall in the gold price is continuing and it is trading near six-year lows against the dollar.
Source : News24Wire