Gold Prices, Expected to Move Down Further as USD Rises More

Gold Prices, Expected to Move Down Further as USD Rises More
Gold Prices, Expected to Move Down Further as USD Rises More

The falling gold prices are speculated to go down even further. Tuesday gold traded lower after an atrocious sell-off last week. HSBC gave five reasons as to why the price of this precious metal will go down further due to downgrading prices by most major banks.

Gold, which traded at its three-year low on Thursday, plummeted further by 8% since last week’s start and both HSBC and UBS have sliced their price targets for this yellow metal. HSBC speculates that the average price for gold will stay somewhere near USD1,396 this year, plunging from USD1,542. USB, on the other hand, altered its yearly forecast by more than 40% to USD1,050.

The five fold reasons for the falling gold prices, as quoted by HSBC are as follows: Tapering of the bond-buying program, which is causing a stronger dollar and leading to a plummeting demand from India and China due to a slowed growth in these developing economies. All these factors will further slip the metal down on the price chart in approaching months. Meanwhile, on Tuesday the prices for this precious metal plummeted by over 20% since April trading at USD1,276.

In addition to Fed, the growing gloom for China’s growth potential is bound to create a huge impact on prices of gold. As the second largest economy on globe, this country is also the second largest consumer for this metal. India too, the largest gold consumer, is taking strict steps to curb the demand for the metal. Efforts to bring down gold import and increased import duties are bringing down the demand for bullion as well as crimp jewelry in the country.

In the meantime, economists expect a plunge in GDP for 2013, which is speculated to fall from 8.2% to 7.4% and for the next year from 8.4% to 7.4%.

A stronger USD also indicates a weakening for gold, the dollar index recently rose by 4% after displaying its yearly low in February. Another gold supporter, central bank, currently is neither increasing nor decreasing the buying volume too quickly. The fall in current account balances in developing nations is a reason the bank gave for this neutral time.