Gold Weekly Fundamental Analysis – May 16-20, 2016 -Forecast

Gold declined 1.42% this week ending at 1274.60 but remaining higher than expected. Several Federal Reserve Bank Presidents revealed they had a favorable outlook on the economy and supported gradual adjustments in short-term interest rates. If the Fed does go ahead and raise interest rates, the dollar will likely gain strength and weigh down gold as the two generally move in opposite directions.

Goldman Sachs has softened its stance a little and raised its price target on the precious metal. The heavyweight US broker still does not like the metal much even so.

But after a 20% rise since December and busting through the broker’s short position stop-loss, some reassessment was on the cards.

The New York-based bank says it now expects gold to trade at $1,200 per ounce in three months (up from its previous forecast of $1,100), $1,180 in six months ($1,050), and then $1,150 in 12 months’ time ($1,000).

Even with these tweaks and given that gold is currently trading around $1,270, Goldman’s outlook is quite bearish.

The report’s authors, commodities research heads Jeffrey Currie and Max Layton, cite the renewed confidence in Chinese growth, a stabilizing Yuan and the improving oil price as reasons why they think gold prices are set to moderate over the coming year.

In the first three months of 2016 central banks’ buying was 3% lower compared to the same period last year and 31% down on the final quarter of 2015.

Despite this drop in demand, the industry trade body believes that “central banks’ enthusiasm for gold remains resolute” especially as the group has now been a net purchaser of gold for 21 consecutive quarters.

Investor demand has ignited the price of gold recently, but it is lagging in other areas as well as central banks. The gold price has risen by over 20% since the start of 2016 and enjoyed its best quarter for almost 30 years.

A grim concoction of global uncertainties – from Brexit, to oil prices, right through to the US Presidential elections – has boosted ‘safe haven’ investment demand said the WGC.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Major Economic Events for the week:

Upcoming Government Bond Auctions

Date Time Country 

May 13 12:00 Iceland Holds bond auction

May 18 11:30 Germany Eur 4bn Feb 2026 Bund

May 18 17:20 Sweden Announces details of bond auction on May 25

May 19 10:30 Spain Holds bond auction

May 19 11:03 Sweden Hold bond auction

May 19 11:50 France Holds bond auction

May 20 11:03 Sweden Sek 1.992bn 0.5% Jun 2017 I/L bond