What Factors Will Influence Gold Going Ahead?
Gold this year has gained sharply after bottoming around $1050/troy ounce last year and from the bottom it has strengthen more than 20%, riding on varieties of factors ranging from weaker U.S. Dollar, broad based inflows into commodities, to hedge against future inflation and run for safety.
But can it gain more grounds going ahead?
In several posts already published, we have reiterated that we remain bullish on the yellow metal in medium to longer term and as of now our bull call to buy Gold at $1200/troy ounce targeting $1350 area, with stop loss around $1180/troy ounce remains active. Moreover we expect with a bit larger stop loss bulls can push Gold towards $1650/ troy ounce area.
So what are the factors to watch out for to assess if the above call or you own trade ideas are in right directions –
- FED and U.S. Dollar – As of now current path of rate hikes and U.S. Dollar doesn’t pose major threat to Gold but if FED hike path sharpens and Dollar gets back its groove, it could pose challenges to Gold.
- Equities – This year Gold has started gaining safe haven bids after a long pause, so what happens to equity market will influence gold a lot.
- Inflows – ETF flows should be something to keep watch of. This year inflows into Gold ETFs have been fastest since 2009 but much less that their peak in 2012.
- China frenzy – Chinese commodity frenzy so far eluded Gold. While volume in SHFE Steel Rebar reached record, Gold volume has remained usual. If the Frenzy gets its focus on gold, the yellow metal could run real big in very short time.
- India demand – India’s return to growth path and improvements in urban lifestyle could revive greater demand for gold in world’s most steady and largest buyer country of Gold.
Gold is currently trading at $1278/troy ounce.