Gold rose further from this week's 10-month low overnight as the US dollar eased against the euro ahead of a European Central Bank meeting, and on the view that a US rate rise next week was already reflected in prices.
The most active gold contract for February delivery rose 7.4 U.S. dollars, or 0.63 percent, to settle at 1,177.50 dollars per ounce.
Gold prices ended the U.S. day session moderately higher Wednesday, on some short covering in the futures market and some perceived bargain-basement buying in the cash market, following recent selling pressure that pushed prices to a 10-month low earlier this week.
In November, the metal posted its biggest monthly fall in more than three years. The losing streak spilled into December as fears of US rate rise, an increased appetite for risk and a stronger dollar all weighed on prices at a time of waning demand for gold from top consumers China and India.
The ride has been wild for gold recently, with the metal losing 8% in November.
Gold though is still up over 10% since the start of 2016.
Wednesday, in his presentation at the BoAML 2017 Year Ahead Press Conference., Francisco Blanch, head of Commodities and Derivatives, said that a stronger U.S. dollar and higher bond yields will be two major headwinds for the yellow metal next year.
In its updated forecast, BoAML it expects gold to trade around $1,200 an ounce by mid-2017, “implying limited upside near-term.” The Bank’s forecast is not far from current prices as February gold settled the session at $1,177.50 an ounce, up 0.63% on the day.
Another potential headwind for gold is BoAML’s expectation that real interest rates would likely rise in an environment of subdued inflation.
“Ultimately, 2017 is going to be a story of fiscal loosening and monetary tightening; the combination of which will mean real rates are headed higher and inflation break-evens don’t do much,” said Rajan.
Reference: Business News, Proactive Investors, Kitco
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