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This week gold futures are preparing to end their seventh consecutive weekly loss, its longest weekly losing streak since mid-2004. February gold futures continue to trade near their ten-month lows, last trading at $1,133.90 an ounce, down more than 0.3% from last week.
“A positive close on the year is definitely a victory worth celebrating for the bulls, even if it doesn’t feel like a great victory,” said Adam Button, senior currency strategist at Forexlive.com.
Button added that at current levels, gold is up almost 7% on the year but these gains have been lost in the overall horrible selling pressure seen in the last two months.
As to what is in store for gold in the near year, Button said that he thinks it is still too early to jump into the market and is waiting for a better entry point.
“You can start to nibble at $1,130 but you should be prepared that we can still see much lower prices. I think gold could fall between $1,050 and $1,075,” he said.
The key level on many analysts’ radar is the $1,125 level as this represents the last major retracement level of the 2016 rally. If this level breaks then there is a good chance the price will fall back to the 2015 multi-year lows.
Joshua Mahony, market analyst at IG, said that he would have to see a sustained break above $1,134 to signal an end to the near-term bearish sentiment.
In a recent report Russel Browne, commodity strategist at Scotiabank said that he would have to see gold back above $1,173.50 an ounce before he shifts his bearish outlook.
“In the last two months, the SPDR Gold Exchange Traded Fund (ETF) has witnessed a net outflow of 175tonnes of gold. This suggests that the interest in gold is waning in the wake of tightening of monetary policy in the US. In dollar terms, we are expecting the gold to trade lower in the range of $1,050 to $1,300 per ounce while in the domestic market, gold is expected to trade in the range of Rs 25,000-Rs 29,000 per 10grams,” said Mukesh Kothari, director, RSBL.
Despite the lower prices of gold, Bachhraj Bamalwa, past president of the All India Gems and Jewellery Trade Federation is expecting a lower demand for the yellow metal in 2017 as well.
“The impact of demonetisation is already visible in the entire consumer discretionary sector. The industry has done less business during the October-December quarter traditionally considered to be the peak season for the jewellery industry. The volume of business so far is just 60-70 per cent of what we did during the same period last year. The impact of cash crunch would also be felt in the first quarter of 2017,” he said.
According to the Financial Times, gold was struggling after another turn higher for the US dollar and government bond yields. Year-to-date gains have now been trimmed to around eight per cent.
Prices have fallen from around $1,164 an ounce following the Federal Reserve's latest policy statement last week, which set out an upgraded forecast for three interest rate rises next year.
Having found resistance around the early $1,120 an ounce in the past week, gold could return to around $1,150 before the end of the year, predicts Mark To, the head of research at Hong Kong's Wing Fung Financial Group.
That's a relatively bearish case, however: most analysts seem to expect continued geopolitical and macroeconomic tension should remain supportive of commodity prices in 2017.
Canadian investment bank BMO Capital Markets says gold should average $1,175 an ounce in the next 12 months, according to Mining.com. That's down from its previous prediction of above $1,400 but still up from its current level.
The bank said: "We expect the macro outlook to continue to cloud a precious metal strategy, but recognise that the risk is to the upside given our view that markets are already pricing in the impact of three Fed rate hikes in 2017."
Citigroup predicted a similar level, with mining analyst Trent Allen telling the Sydney Morning Herald gold is expected to "hover around $1,160 an ounce".
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