Gold is likely to remain in a bear market moving into the second half but recover modestly in 2016, Leon Westgate, commodities strategist at ICBC Standard Bank, said in a monthly report.
The continuing strength of the dollar and the renewed expectations of an interest rate rise from the Federal Reserve in 2015 are both negative factors, the report said. Sustained low oil prices and tepid US inflation would also play a factor in the price of the yellow-metal.
In fundamentals, the lack of physical demand is concerning with prices at the lowest level in five years and any rebound will likely be dependent on increased Chinese buying.
“It is likely that Chinese demand will be the tipping factor in the supply and demand equation,” Westgate said. “Chinese demand will likely continue to grow by way of investment, jewellery and so far disappointing People’s Bank of China (PBoC) demand, with emerging deficits helping to lend some background support to the gold price.”
The gold price is expected to rise to $1,275 per ounce in 2016 and advance to $1,375 per ounce.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange is currently trading at $1,092.90.
(Editing by Tom Jennemann)
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