Platinum price surpasses the gold’s; gold investment may be
negative for the first time in thirteen years
The constantly declining price of gold could make gold investment income negative for the first time in 13 years.
Since this year, the price of gold had fallen by more than 20%. In the precious metals, except for a big drop in gold and silver, the price of platinum and palladium did not show obvious signs of decline and at present, the price of platinum had exceeded that of gold.
Citigroup recently released a report that the average price of gold in 2014 is expected to be at 1255 U.S. dollars per ounce. And the price of gold would fall sharply this year for market expectation on Federal Reserve starting to cut loose policy, but the vehement demand from China would give the gold price support to some extent. However, in precious metals, it would be particularly optimistic on the prospect of the palladium price.
Citibank said, it was expected that the palladium investment demand would continue to rise, promoting the palladium price close to 900 U.S. dollars per ounce before the end of 2014. And the average price of palladium would be at 850 U.S. dollars per ounce during 4th quarter in 2014.
Citibank said that the average price of platinum was expected to be at 1525 U.S. dollars per ounce during 4th quarter in 2014. And compared with the current price level, it would rise by about 5%. The platinum price was forecasted to be at 1500 U.S. dollars per ounce in 2014.
Previously, the report on the trend of gold demand during 3rd quarter in 2013, published by the World Gold Council, showed that the overall demand on gold was nearly 869 tons in 3rd quarter in the world and this was 21% year-on-year decline. Since this year, the gold demand in the world fell by 12% in year-on-year state, and the decline in demand was mainly due to the considerable reduction in the gold ETF holding.
Since American economy showed obvious warmer signs, investors expected that the USA quantitative loose policy would exit beforehand and so, they reduced the ETF position. The data from the World Gold Council showed that after the gold ETF reduced 402 net tons in the 2nd quarter, the gold ETF in 3rd continued to reduce to 119 tons’ position. And in the first 9 months of this year, the gold ETF reduced nearly 700 tons.
Up to now, in terms of the world’s largest gold ETF(Exchange Traded Fund) ——SPDR Gold Trust GLD, its gold holdings were reduced to 863 tons and hit the lowest once again since February 2009.
The Federal Reserve’s monetary policy was still the biggest factor that influenced the gold market. Both organizations and individual investors, the concern about the uncertain increase in interest rates from the Federal Reserve also deepened the worry about the trend of gold. And this had a direct impact on the changes in the holdings of the gold ETF as well as the physical gold demands from Asian investors.
However, Bernanke, the Federal Reserve Chairman, said recently that if necessary, the Federal Reserve would still maintain the ultra loose monetary policy. And only with a guarantee that the job market continued to be improved, would the Federal Reserve begin to cut debt purchase. Even if the unemployment rate dropped to below 6.5%, the federal funds rate also may still be maintained at near zero.
Bernanke also pointed out, the target of the 6.5% unemployment rate was only a threshold, not the trigger mechanism for increasing interest rates. And in judging the employment market prospects, the cumulative progress since September 2012 and the future prospects in continuous improvement would be taken into account.
However, the comments on backing the loose policy from Bernanke did not bring temporary buying for the already weak gold market. The analysis from the standard bank showed that only with a physical gold demand in short-term could not propel the gold price to continuously rise. The main reason was that the expectation on Federal Reserve’s exiting from loose policy continued to rise in the market.
What is noteworthy was that the holdings outflow rate of gold ETF had obviously slowed down compared with that of the first half of the year. The latest report from Deutsch Bank showed that the price of gold would rise in short-term if the outflows rate on gold ETF fund slowed down or was gradually stable. But the gains would be very limited, and the prospect of gold price was not optimistic. (Yang Liuhan) (Translated by TLRHVC)
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