The Conversation (4)
The gold price has dropped to its lowest levels since the Brexit in June.
The gold price has taken a huge plunge this week, reaching its lowest levels since the United Kingdom’s decision to leave the European Union back in June.
On Wednesday (October 5), the gold price dipped to $1,267.30–a 3.50 percent loss over the week.
While the slump is the biggest the gold price has seen since Brexit, the Wall Street journal noted that the gold price drop was its biggest decline in almost three years.
The dip was also felt in Canada, as gold miners on the S&P/TSX Composite index (INDEXTSI:OSPTX) dropped as a result of the lower gold price, although by Wednesday the index appeared to be on the rise again.
Still, there are a number of contributing factors involved in the gold price slipping; most notably investors’ growing speculation that the Federal Reserve will raise the rates before the end of the year–and there’s evidence to back that up.
The Wall Street Journal further reported that the economy is “strong enough to bear a rate increase” after the Institute for Supply Management’s non-manufacturing index reached its highest level in roughly a year in September.
“People are coming to terms with an eventual rate rise, possibly this year,” James Steel, strategist at HSBC told the Wall Street Journal.
What that means, then, is more bad news for the gold price: Bloomberg reported Georgette Boele, strategist at ABN Amro Bank NV said that the yellow metal may very well dip to $1,257 per ounce.
Others have taken a much more bearish approach. In an interview with Bloomberg, Adam Flinn, who looks over the precious metals sector at Triland metals, said that the “gold bull has been given a good scare.”
“It’s not dead yet. We could drop down to $1,172 and still see a medium-term continuation of the move higher,” he continued.
On the other hand, however, a panel of analysts over at FocusEconomics see gold prices “holding steady” in the coming months, averaging $1,342 an ounce in the fourth quarter of 2016–at least according to its September 2016 Forecast.
Naturally, investors in the gold sector will be watching the space closely to see how the gold price rebounds.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
