Dubai: Only a shock Donald Trump win is likely to shake off the current lethargy in gold prices — and push the metal to levels above $1,400 (Dh5,138) an ounce and “even $1,500 for the first time since April 2013”, according to a new quarterly update from Thomson-Reuters.
“If Clinton wins then it is probable that some of the risk premium in the gold price at present would be lost in a knee-jerk response, potentially causing a downward shift of around $50,” states the report. “Given these contrasting outcomes and a great degree of political uncertainty we would not be surprised if the gold market experiences increased volatility in the coming months.”
“The attention of the gold market has clearly shifted during the past quarter from Brexit to the US presidential election.”
But for the time being, prices are bound to a tight range of $1,260 to $1,270 an ounce. The sentiment that gold could slip to $1,240 and then further to breaking $1,200 has not panned out, says Dubai’s gold and jewellery trade sources.
In Dubai/UAE, it means gold at Dh144.75 a gram on Friday (October 28) against Dh144.5 a day before.
“No price shocks on the upside is helping maintain buying activity during the ongoing Diwali season and touch a peak between Friday and Sunday,” said Cyriac Varghese, General Manager of Sky Jewellery. “Gold prices continue to be on the higher side because of this perception of sizeable buying support during the festive season. Other fundamentals are also supportive of these levels … at least for the moment.”
Low demand
Any help from retail buyers would come as relief for retailers here and in heavy consuming markets such as India and China. Worldwide demand for the metal has been “pitiful” levels, “down 30 per cent year-on-year in the third quarter of 2016, hindered by sharply higher prices at the start of the quarter in the aftermath of the Brexit vote,” the “GFMS Gold Survey: Q3 2016 Review and Outlook”.
The two biggest markets for gold retail buying, India and China, saw declines of 41 per cent and 27 per cent, respectively, during the third quarter against the levels seen a year ago. “Jewellery consumption in 2016 appears set to record a seven-year low in China and a 13-year low in India,” the report adds.
“This is despite the fact that in both cases the country’s GDP was less than half this year’s level back then.”
Across the board, jewellery consumption was estimated at 375 tonnes, a slight improvement from the second quarter of 2016, but nowhere near the 522 tonnes in the third quarter of 2015. The sparkle is clearly missing in the gold retail markets.
Factbox: Gold could turns pricier in 2017
* If gold prices stabilise at $1,240 (Dh4,550.80) an ounce plus level, that should be enough to spark demand in most of the key consuming markets, states the Thomson-Reuters third quarter update.
And if this demand holds, particularly in Asia, this “will spark to life and underpin gold prices. ETF (exchange traded funds) demand in the west is also set to remain at healthy levels with a growing number of financial institutions recommending gold purchases in a world with trillions of dollars of negative yielding bonds.
“Consequently, we forecast gold prices to average $1,420 in 2017.”
