The plunge in gold prices could be repeated over coming months

MUMBAI (Scrap Monster): According to analysts, the plunge in gold prices following strong US jobs data could repeat over coming months. The prices are likely to fall further to $1,100 per Oz by June this year. Subsequently, strong growth in physical gold demand from Asian countries is likely to lift the gold prices to $1,280 towards end-2014.

 

The US non-farm payroll data released Friday night showed that the country added 295,000 jobs during the month of February this year. This was 55,000 more than the consensus estimates. Furthermore, the US unemployment rate dropped to 5.5%- the lowest since May 2008. Post announcement of strong US jobs data, gold which was hovering around $1,200 per Oz fell sharply by 2.6% to $1,170 per Oz on Monday trade.

 

According to UBS, the extremely strong jobs data has turned out to be a big driver of gold prices. In addition, gold has breached crucial technical support level with Friday’s plunge, triggering further sell-off. $1,185 level had served as a strong support level for the past two years. The yellow metal had lot of triggers to bounce back from those levels. However, significant amount of value has gone through once gold broke these levels, UBS noted.

 

Traditionally, the months from April through July have turned out to be softer for gold. Gold is likely to witness further price decline during this period. The only positive trigger that is seen holding gold prices is the physical demand from Asian countries. The forthcoming months are likely to witness strong battle between US interest rate hikes in the West and physical demand in the East.

 

The strong Asian physical gold demand may lift the gold prices from its floor to higher levels during the latter half of the year. ANZ forecasts gold prices to touch $1,280 by end-2015.