Gold Fundamental Forecast – August 24, 2016

Gold has been moving between gains and losses with no distinct trend today. Gold is range trading at 1344.35 and is expected to hold here until Yellen’s speech on Friday. Weakness in gold was mostly in step with a weak trend overseas after a Federal Reserve official signaled that an increase in US interest rates is still possible this year, hurting demand for the precious metal as a safe-haven investment.

The demand for and supply of physical gold is only of the factors that influence the price. In times of uncertainty, it is the demand for gold as investment that drives prices. We see this now in the way gold prices have rebounded since the beginning of the year mainly because of the poor state of the world economy and the uncertainty about US Federal Reserve being able to normalize interest rates any time soon. In fact, their inability to push through their stated intention to increase interest rates has been a great source of support for gold price. The other factors to watch out for would be how Europe fares in the aftermath of Brexit and in the longer term, how China manages the shift away from growth led by exports to one led by domestic consumption.

“People are worried that September rate hike is not completely ruled out as a possibility. Although the medium-to-long term prospects for a series of rate hikes is not really high, there should be some short-term pressure on gold,” said the head of research at Hong Kong’s Wing Fung Financial Group.

“Investor’s momentum has been lagging for some time. The exchange traded funds have not risen significantly and that should be a short-term bearish signal for gold,” To said, adding that gold might soon test the level of $1,280-$1,300.

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Upcoming Economic Events that you should be monitoring:

August 24, 2016

Government Bond Auctions

Date Time Country Auction

Aug 24 10:03 Sweden Holds bond auction

Aug 24 10:30 Germany Eur 4bn 0% Oct 2021 Bobl

Aug 24 18:00 US Holds 2yr FRN auction & 5yr note auction

Aug 25 18:00 US Holds 7yr note auction

Aug 26 10:10 Italy Holds zero coupon