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Gold rebounds but looks set for 2016 fall say analysts

ABN Amro expects the start of 2016 to be negative for precious metal prices.

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Other analysts agree that the rebound won’t last long.

With the start of the Federal Reserve interest rate hike cycle out of the way, gold made its way higher again on Friday.

On Wednesday, the US Federal Reserve hiked interest rates by 25 basis points, sending the metal sharply lower.

But investors were quick to buy back in, with gold rising by US$7 to US$1,059 as the result was largely priced in by the market.

And this may the case until the New Year according to ABN Amro, but the analyst doesn’t expect to the metal to be able to remain at its current levels for long.

“In the coming days and weeks, the downside in precious metal prices may be limited due to low activity as a result of Christmas and New Year,” Amro said.

But the analyst said it expects the start of 2016 to be negative for precious metal prices.

“It is likely that investors will continue to liquidate positions in the months ahead because of a higher US dollar and higher US rates,” Amro added.

As a result, new lows in prices could be reached before the end of the first quarter of 2016, it suggests.

It forecasts gold prices to break below US$1,000 per ounce in the coming months.

And other analysts agree that the rebound won’t last long.

Lukman Otunuga, research analyst at FXTM, said: “Gold remains heavily bearish and bears have been gifted an opportunity to install another round of selling momentum throughout metals before the end of the year.”

He suggests that, “with any hopes of a recovery in prices discounted,” further dollar appreciation should send the zero yielding metal back towards US$1,046 and potentially lower.

Elsewhere, silver rose around 1.5% to US$13.91 while platinum climbed US$7 to US$850.

 

Major Movers

Randgold Resources up 41p to 4,018p

Fresnillo up 5p to 659p

Anglo American up 12p to 275p

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