Baku, Azerbaijan, July 23
By Leman Zeynalova – Trend:
The price of gold has plunged recently, despite the fall in real yields in the US, which would usually be positive for prices, the UK-based Capital Economics consulting company said in its reported obtained by Trend.
"What’s more, gold has failed to benefit from safe-haven buying on the back of escalating trade tensions and heightened geopolitical risk. Other safe havens, like the Japanese yen, have generally held up a bit better," said the report.
Capital Economics believe that the appreciation of the US dollar has been a key driver of the fall in gold prices.
"We suspect that even if a full-blown trade war is avoided, the dollar will not fall back sharply in the near term," said the report.
"This would act as a cap on the price of gold. We also expect the Fed to hike rates two more times this year, which would not be good news for non-interest bearing assets like gold. However, we do expect some renewed demand for gold as a safe haven, or as an inflation hedge, to boost the price to $1,300 per ounce by end-2018."
That said, the medium-term outlook for gold is more positive, according to Capital Economics, as the company expects the Fed to stop raising rates in 2019.
"The US economy is also likely to slow next year which, coupled with lower yields and a weaker dollar, would probably give a lift to the price of gold," said the report.
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