Last month, the price of gold hit a single biggest monthly decline in more than 3 years, erasing all rally in the first 10 months, Reuters blamed the 5 factors of the formation of a "perfect storm" hit.
The Seeking Alpha analysts ' Caiman Valores warned that "gold-oil ratio" and suggests that the current market environment, prices for short term could drop to us $1000. Gold in the Trump (Donald Trump) was elected United States President accelerated drop, due to a stronger dollar, soaring bond yields and the prospect of financial market optimism rising against the safe-haven demand for gold. In addition, the traditional gold fire brigade-China and India consumer, are subject to import controls and the cash impact of the reform measures, buying does not power on.
Following is blowing gold prices decline a "perfect storm" 5 reasons: 1. the United States Federal Reserve (Fed) 14th meeting is expected to raise interest rates, could not offer a prime attraction to fade. Julius Baer analyst Carsten Menke said that investors focused on Donald Trump's stimulus commitments, making United States pace rate hikes may speed up, the dollar maintained strength.
Fed to raise interest rates at the end of last year, gold then goes down 10%; raise rates if the Fed suggests that cycling open, gold prices fell further. 2. United States 10-year bond yields jumped after the Trump was elected as the market expected, Trump promised to expand infrastructure spending, will push up United States inflation rates make existing bonds less valuable circulation.
Capital Economics analysts Simona Gambarini said, this time, bond yields, and are not as safe-haven demand heats up, and make it pay more than gold, squeezed to the latter requirement. 3. the dollar rose, traditionally against dollar-denominated gold. Dollar index skyrocketed last month 13.5-year high, gold prices plunged one of the main reasons.
While the dollar and the rise in gold prices in 2010 and 2011, hand in hand, but because of strong investor demand for safe-haven, sufficient to lift these two assets; but this dollar rally, but not driven by safe-haven demand. 4. Gold hedging benefits from financial market volatility decreases. After the collapse of Lehman Brothers triggered the financial crisis before gold prices soared; by the year 2011 Greece debt crisis, gold prices are spiralling.
But this year the United Kingdom referendum exit, gold's reaction was less intense, Commerzbank Carsten Fritsch, an analyst believes that market participants for significant risks have been tired. 5. China and India's physical gold demand, does not timely brought "dips approach" to buy.
Because the two countries have recently taken action to limit the outflow of funds and cracking down on black gold, Oxford Economics analyst Daniel Smith points out that the gold underlying weak demand in key Asian markets, weakening one of gold's upward momentum of the past. Valores Saturday of the Seeking Alpha (3rd) wrote that " gold-to-oil ratio" is a pointer to notice well in advance of the economic crisis. The wind's 26-year high earlier this year, but the crisis has not occurred, and signs that the proportion will go down.
From current trends in oil prices, gold prices declined there is space in the short term. Gold/oil ratio: calculated at a specific time, an ounce of gold can buy how many barrels of crude oil. The higher the number, oil becomes cheaper, and the value of gold and stronger purchasing power. It is usually as a pointer to the first financial market shocks, notice the next major political and economic events can occur.
Pointer the heat because oil is the economic activity, while the gold is the most popular crisis of safe-haven assets. Valores writes, in the past 26 years, "gold-oil ratio" surge has 4 accurately predicted crises and shocks, as shown in the figure.
But the ratio soared last year after an all-time high of 40, but is not a crisis, and then fell to a nearly 2-year low of 23, attributed to the Trump gold prices tumbled after his election, as well as organization of petroleum exporting countries (OPEC) agreement on partnership in the production, driving up oil prices. Valores pointed out that if the "gold-oil ratio" trend and Wall Street "fear index" VIX, "gold-oil ratio" predictive power is not malfunctioning. Level as the gold/oil ratio is still higher than the average of 16 in 26 years, but the VIX index is just over 15, below the same period average of 20.
He thinks it shows large market worries oil prices Outlook, rather than concerns about the overall economy or the stock market. Valores, since Trump elected to stimulate United States and global economic Outlook, optimistic, some stabilisation in oil prices, gold/oil ratio may fall to 20. If the oil price stays at 50-55 Yuan per barrel level, you should take the current gold prices around $1170 per ounce, was revised down to $1000-1100.
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