Downward pressure exerted on gold
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
When this column looked at gold just two weeks ago, we noted that recent weakness at least had not seen the price break the 2014 upward trending channel.
So much for that.
By mid-session on Tuesday, bullion was well below $1,300 an ounce, having dropped through the 50-day and 200-day moving averages.
As worries about Ukraine subside and US short-term interest rates have risen, so gold has lost its haven premium and the opportunity cost of holding the metal has risen.
Andrew Wilkinson, chief market analyst at Interactive Brokers, notes that Monday saw a surge in put option buying in the US-based SPDR Gold trust exchanged traded fund, an indication that retail investors are getting more bearish on the bullion.
Walter de Wet, strategist at Standard Bank, says rising real interest rates will continue to deliver downward pressure on the gold price and this will be exacerbated by weak physical demand.
“We have been tracking gold physical demand, mainly in Asia, on a daily basis for the past five years. Indications are that since the end of February, demand has slowed substantially.”
Standard reckons the average gold price this quarter will be $1,180.
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