Thursday, October 3rd 01:36 PM IST

Gold prices could fall to $1170 in 6-12 months: Natixis

# gold  # central banks  # etf  # mining  # retail demand  

In light of the weakness of developing country economies in recent months and the accompanying weakness in their currencies, central bank demand for gold may beaffected by the decline in holdings of foreign exchange reserves as central banks draw down their reserves in an effort to support their currencies.

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LONDON (Bullion Street): Gold prices could fall to a low of $1170/Oz in the next 6-12 months, according to Natixis.Gold prices have fallen 20% this year while the Dow Jones Index has risen 17% since 2013, Natixis report said.

Negative factors for Gold:
-Further outflows from exchange traded funds-- to put additional pressure on price of gold-This will lead to further increase in supply of gold

-Events in US will have the biggest impact on gold: If due to improvements in economy, interst rates could rise which could further impact gold. It will drive down the need for safe haven investments, Natixis report said.

-Higher US yields will raise the opportunity cost of holding gold

-If India continues to impose curbs on gold imports, the yellow metal could have a precipitous drop-

In light of the weakness of developing country economies in recent months and the accompanying weakness in their currencies, central bank demand for gold may beaffected by the decline in holdings of foreign exchange reserves as central banks draw down their reserves in an effort to support their currencies.

Positive Factors
-Tensions in the Middle East can push gold prices to a high of $1700 in 2014 and $1800 in 2015.
-Retail demand is robust on fall in prices while institional and wholesale players sold heavily in the first half of 2013

-Strong retail demand has has necessitated a shift out of bullion (400 oz bars) into kilo-bars, this being the format in which jewellers typically acquire the metal for the manufacture of products for their local markets. As a result, the strength of retail demand has been visible this year in terms of both physicalpremiums as well as volumes of gold coin sales.

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