Gold price could fall below $1,200 an ounce
London (July 11) The gold price could fall below $1,200 an ounce in the coming days amid speculation of tighter monetary policy in the month ahead, according to one analyst.
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Spot gold touched recovered modestly to around $1,210 earlier today after touching $1,207 an ounce, its lowest for four months, during trading on Monday.
Naeem Aslam, chief market analyst at Think Markets UK, told MarketWatch: "The hawkish tone by central banks around the globe and sturdy US [jobs] data released on Friday is going to provide enough catalyst for the gold traders to push the price below the mark of $1,200.
He added that he saw support for gold at $1,177 if prices did fall lower than that threshold.
That "hawkish tone" includes comments by the European Central Bank that it might begin to raise interest rates and reduce bond buying.
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In addition, there is the decision by the US Federal Reserve to raise interest rates twice so far this year, with further tightening predicted after figures last Friday showed the economy added 220,000 jobs last month.
Fed chairwoman Janet Yellen is due to give a speech later today. MKS PAMP analyst Tim Brown told Reuters a "hawkish" address - which "it's probably going to be" - would "put a little more pressure on gold again".
However, some analysts expect gold to rebound slightly in the coming days, even if it is on a longer-term decline.
According to various studies of the current trend, traders could take it to a range between $1,225 and $1,231 an ounce, says Reuters' analyst Wang Tao.
Gold price rooted near four-month low after US jobs report
10 July
Gold fell to a four-month low at the end of last week and was languishing less than two dollars above that level this afternoon as the market continues to respond to a strong US jobs report.
In late Friday trading in New York, it hit a little above $1,207 an ounce, its lowest since 14 March. It was still below $1,209 this afternoon in London.
This followed the publication of the latest non-farms payroll report from the US Department of Labour, which said that 220,000 jobs were added in June, "smashing Wall Street expectations of a 178,000 gain", says the Financial Times.
Initially disappointing figures for May were also revised higher, adds the paper.
Despite weak wage growth, which is running at 2.5 per cent year-on-year, economists believe the employment market is doing enough to justify the US Federal Reserve raising interest rates in the autumn for the third time this year.
When rates rise, the opportunity cost of holding assets with fixed or no yield, such as bonds and gold, also increases. Traders tend to sell gold and buy instead into the likes of shares, which respond well to rates rises.
The only thing that has been helping gold of late is political uncertainty, as traders tend to view gold as a "safe haven" store of value. But tensions have eased somewhat more recently.
TheWeek
