Experts: Gold Won't Continue Rally
Wednesday, 02 Jul 2014 07:17 AM
Gold has risen 10 percent this year, rebounding from the biggest annual slump in three decades, as the Federal Reserve said it will keep interest rates at almost zero for a considerable time and as unrest in Iraq and Ukraine spurred haven demand.
Gold for immediate delivery was at $1,327.55 an ounce in London. It reached $1,332.33 Tuesday, the highest since March 24.
Sliding demand for gold jewelry and bullion in China and India, the world's two biggest gold buyers, will put a lid on gold prices, experts tell The Wall Street Journal. So will the Fed's reversal of some of its monetary stimulus.
"Gold is likely to migrate lower as the U.S. economy improves [and] physical demand is harder to find," Bart Melek, a senior commodities strategist with TD Securities, tells The Journal.
The economy shrank 2.9 percent in the first quarter, but many analysts forecast it will grow at least 3 percent for the rest of the year.
Credit Suisse analyst Tom Kendall forecasts gold will average $1,270 an ounce in the third quarter and then slide to $1,220 at year-end, The Journal reports.
"Until you see a pickup in physical demand or a pickup in investment demand, it's hard to see gold hold significant rallies," says Howard Wen, an analyst with HSBC.
Recent currency moves buoyed the precious metal Tuesday, market participants say. The euro stood at $1.3688 Tuesday afternoon, up from $1.3532 June 11.
"The dollar weakness is helping gold stay supported at current levels," Mike Dragosits, a senior commodity strategist at TD Securities, tells Bloomberg. "Economic data will determine how dovish the Fed remains, and that will guide gold."
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