Outlook Changing
While Goldman is forecasting higher U.S. interest rates, investors have scaled back expectations for increases this year as global equity markets sank, oil extended losses and China’s economy slowed. There’s now no chance of an increase next month, down from the 51 percent odds seen at the start of the year, according to data tracked by Bloomberg.
“We’ve had four years of losses in gold, but it seems the bottom has come in just at the moment when central bankers have again run into a wall,” said Adrian Ash, head of research at BullionVault, an online trading service in London. “It’s clear that the Fed won’t be able to raise rates this year, and investors are taking another hard look at gold. This rally could get very interesting.”
Slumping equity markets are forcing some investors to seek alternative assets like gold. The MSCI All-World Country Index, a measure of global stocks, has tumbled 11 percent in 2016, the worst start to a year since the financial crisis in 2008.
“Sentiment towards gold seems to be turning, particularly given the stock market volatility,” Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland, which oversees $145 million, said by e-mail on Jan. 29.
For Adam Finn, the head of precious metals at Triland Metals in London, this year’s rally is more of a blip than a change in the long-term, bearish trend for gold. While prices rose above their 200-day moving average on Feb. 3, such moves have been more reliable as a sell signal than a buy signal, he said. The previous three times that occurred, gold fell 4.6 percent the following month.
“The rally may well be running out of momentum,” Finn said Monday. “We’ve seen these January rallies before, and they often proved short-lived.”