Gold Price Analysis: Three reasons why strong physical demand won’t stop XAU/USD falling – CE


Recent data have highlighted the strength of the rebound in physical demand for gold, especially in India and China. But strategists at Capital Economics don’t think this poses much of a risk to their forecast for the gold price to fall this year.

See – Gold Price Analysis: XAU/USD to wait until the end of the year to see new highs – Credit Suisse

Gold to drop back to $1,600 by the end of this year

“Consumer demand has historically been strong after a period of falling prices, reflecting the more price-sensitive nature of these purchases. The upshot is that consumer demand for gold responds to changes in the price (often driven by external factors) much more than the gold price responds to changes in consumer demand. So the recent rise in consumer demand is a symptom of a lower gold price, rather than a reason to think it will rise again.”

“Some of the increase in India’s gold imports in March appears to be due to temporary factors that should fade, rather than a longer-term shift. Imports may have been boosted by seasonal stockpiling and delayed purchases from earlier months given expectations for a cut to gold import duties, which was announced in February. In any case, the worrying resurgence in virus cases in India will probably also depress gold demand in the near term.”

“Two other factors, namely US real yields and the US dollar, are much more important drivers of the price, and we expect both to weigh on the price of gold over the next year or so. We think the recent rise in longer-term real yields in the US will resume before long, which would increase the opportunity cost of holding gold. Meanwhile, we also anticipate that a stronger US dollar will make gold more expensive to non-US investors.”

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Are you new to trading or have been trading for a while and you feel stuck?

Try with us!
Become Premium!
   

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD skyrockets to 1.2150 on poor US jobs figures

EUR/USD has hit a new multi-month peak above 1.2150 after the US reported an increase of only 266,000 jobs in April against nearly one million expected. The dollar is under immense pressure. 

EUR/USD News

GBP/USD soars toward 1.40 after disappointing Nonfarm Payrolls

GBP/USD has been extending its gains after the US Nonfarm Payrolls badly disappointed with an increase of only 266,000 jobs in April, nearing 1.40. Earlier, sterling benefited from the UK Conservative Party's gains in local elections. 

GBP/USD News

XAU/USD soars above $1,835 after weak Nonfarm Payrolls

Gold has leaped above $1,835 after the US reported an increase of only 266K jobs in April, far below expectations. Lower US yields support the precious metal.

Gold News

Judge reaffirms order SEC must produce documents on Bitcoin, Ether and XRP in Ripple case

Ripple's victory granted the firm access to the SEC's documents on the three leading cryptocurrencies. The regulatory agency recently denied the possession of these documents.

More Dogecoin News

S&P 500 and Nasdaq: Can the Fed pump anymore after weak jobs report

Well, that was an interesting jobs report. Not too many people were forecasting that one. Just in case you missed it NFP were forecast to come in around the 1 million jobs gained but instead the US only added 266k.

Read more

Forex MAJORS

Cryptocurrencies

Signatures