Expert Commentary: Focus on Gold

What factors would determine the future performance of gold prices?

I suppose that it is all about the outlook for the trend of interest rates in the United States. By that I mean the Treasury Inflation Protected Securities yield and the federal funds rate. In my opinion, these would be the factors that will drive the price of gold. At this point in time, our view is that the fed fund rate will be moving higher, thus, we are not anticipating much more strength in gold prices, not much beyond the $1,300 to $1,350.

Gold has recently gained traction and turned positive against the US Dollar. What is your next quarter forecast for this pair?

We will be looking for some Dollar strength and gold price weakness in the next quarter. Over the course of the next three months, we expect gold to be seen trading at about the same levels it is trading right now or perhaps even a little bit stronger.

Overall investor demand for gold still appears weak. Do you think it will change in the near future?

For the next twelve to eighteen months we expect the demand for gold to weaken further. Naturally, investment demand is the main headwind for the global gold market, but as we price in a stronger chance of tight Federal Reserve policy, gold investment demand should continue to slow.

Harry Colvin

Director and Senior Economist at Longview Economic