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Two things holding back gold price gone soon

Bullish bets are on the table. Image: Glencore precious metals refinery in Kazakhstan by VisMedia

On Wednesday, gold drifted lower again after bouncing off the $1,150 an ounce resistance level it has been unable to breach convincingly since mid-July.

In late afternoon dealings on the Comex market in New York, gold futures with December delivery dates were trading at $1,145.60 an ounce, still up 3% so far in October.

In a new research note Capital Economics builds a case for gold to move higher when two factors that have been holding it back begin to fade.

The independent research house says that apart from rising bond yields and the strong dollar gold has been prevented from moving higher by the negative sentiment towards the metals sector in general given its close relationship with copper, and subdued inflation expectations.

2 things holding gold price back gone soon

Source: Capital Economics

Both of these headwinds are likely to begin to die down towards the end of the year pushing gold to $1,200 an ounce by end-2015 and support the price further out too with the metal reaching $1,400 by the end of next year:

“We expect other metals to recover as the news from China improves, while inflation expectations should rebound as oil prices pick up and labour markets continue to tighten.

“Indeed, headline inflation should snap back in most economies over the next few months as the big falls in oil prices in late 2014 drop out of the annual comparison.


2 things holding gold price back gone soon

Source: Capital Economics