At least two sectors witnessed strong activities at the height of the financial crisis. One was the oil, and the other was the yellow metal. Now, both are firmly under the bearish grip after the stock market started witnessing an uptrend. If the current negative sentiments for these two sectors were not sufficient, the likelihood of an interest rate hike would further dampen the spirit of investing in the two key commodities going into the next year.
Below Thousand Mark Seen
Currently, Gold is trading above $1,000 per ounce in the bullion market. In the last six-month period, the yellow metal has witnessed a significant downside. In June, the precious metal was trading around a shade less than $1200 per ounce and it is now available around $1,050 an ounce. That demonstrated the continuous weakness in the yellow metal and the conditions ahead of it.
There is a fear that Gold will fall to $955 an ounce before the end of the next year. Global Asset Allocation Head, Alain Bokobza, said that the Federal Reserve is expected to initiate the process of hiking the interest rates this week. That would be followed by three hikes next year. Raising interest rates meant that borrowing costs would also grow. The projected price of gold indicates that the prices would drop by 10% to trade the lowest after September 2009. That will be better than the oil scenario since Oil price has already hit its lowest after the year 2008.
Annual For The Third Time
As the Fed is preparing to increase the interest rates, Gold is set to close the year with a loss. That would mean that it was suffering an annual loss for the third year. However, the demand for the American currency would get more appealing. Traders bet that there was 78% of chance that the Central Bank will hike the borrowing costs.
Bokobza said that the traders and manufacturers were looking more at the scenario of the next year. That was because, the Fed will keep on tightening the rates based on the economy, which is expected to do well. Therefore, that does not present bright picture for the yellow metal. Therefore, he said that Gold would be the casualty of the interest rate hike.
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