Analysts at Citi Research expect a stronger U.S. dollar to push gold into a lower trading range in the second half of the year.
Referring to the fact that that U.S. economy is gaining momentum, the bank has revised its expectations for the timing of a hike in Federal Reserve monetary policy from December to September. The lender suggests that recent headlines about the possibility of two rate hikes in 2015 are not completely unwarranted.
“With the U.S. economic outlook turning more positive and the Fed very likely to hike this year, we expect U.S. dollar strength to re-emerge heading into 4Q, pointing to a downside bias for gold prices to trade in a $1,150-1,190/t oz. range in 2H’15,” Citi says.
Citi Research also said that Gold ETF holdings were lower in the second quarter despite steady metal prices.
For the quarter to date, gold ETF investment has fallen by 28 metric tons, though the bank suggests that since mid-June, this has rose slightly by around 4 tons.
“Historically, ETF holdings tend to move in tandem with gold prices, making 2Q net outflows somewhat unusual given that gold has traded very range-bound since March,” Citi says.
“Indeed, gold prices averaged $1,193/t oz. QTD (quarter to date) – only slightly below Citi’s Q2’15 price forecast of $1,200/t oz – and rarely traded outside the $1,170-1,220/t oz band.”
Credit: mql5.com
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