The outlook for gold will remain negative in the first half and towards the end of the year, with spot prices forecast to hit below $1,100 an ounce.
According to the latest analysis, the bullion is expected to bottom out in the $1,046 to $1,100 per ounce range, as investors look to other assets, while the US economy, along with the greenback, is showing some strength and interest rate hike expectations persist.
Overall, average spot prices are forecast to be around $1,100 per ounce, the lowest average this year, in June, as well as in September and December.
“We expect the outlook for gold prices for the first half of the year to remain negative. Investor demand remains the most crucial driver pushing gold prices lower. From an investor point of view, there is little reason to hold gold as an investment,” noted Georgette Boele, coordinator FX and precious metals strategy at ABN Amro,
She said that the rise in US treasury yields, which indicate improving economic outlook, and expectations about upcoming rate adjustments by the US Federal Reserve are going to continue to weigh on yellow metal prices.
The bullion dropped to $1,171.70 an ounce on Friday due to a strong dollar and robust employment data from the United States.
Analysts had earlier told Gulf News that they expect the yellow metal to perform worse this year than it did in 2016.
“If US economic data in the coming weeks and months surprise positively as we expect it is likely that investors will continue to liquidate gold positions. In such an environment, gold prices could drop below $1,100 per ounce and approach the 2015 low of $1,046 per ounce,” noted Boele.
“However, as the net-long speculative positioning in the futures market is already below the average level and ETF (exchange traded funds) positions are slightly more sticky, the decline in gold prices may come at a slower pace than was seen in the last weeks of 2016. We expect prices to bottom out in the $1,046 – $1,100 per ounce range.”
For UAE residents looking to find bargains in the gold market, factors to watch out for this year include the economic performance in the US, physical demand from China and India, Fed rate adjustments and Brexit implementation, among others.
So far, gold inched up in the first few days of the New Year, with the 24K retailing at Dh140.25 per gram in Dubai. But the “small relief rally” can only be attributed to the fact that the December rate increase and the Fed’s latest comments “have been fully digested,” the greenback and bond yields had taken a breather and markets had shown volatility recently.
Besides, gold tends to start the new year on a positive note, rising in January 65 per cent of the time, according to Boele. “The positive starts to the year happened regardless of whether the year before had ended on a positive or a negative note, 35 per cent of the time, prices declined in January.”
Precious metal forecasts in 2017/ US dollars, per ounce:
Average per quarter: