Gold prices slip as risk aversion fades

Market Trends - 23/03/2016

Following the terror attack in Brussels yesterday, Gold prices found a bid which saw the precious metal quickly rally back above the $1250 handle. However, by the US trading session, Gold started to ease back settling lower at $1248. In today's early Asian trading, Gold posted a steady decline and is currently down -1.16% at the time of writing, trading at $1234 an ounce. The precious metal eased back following comments from more Fed members who were optimistic about future rate hikes. The comments from Chicago Federal Reserve President, Charles Evans helped to boost the sentiment in the US dollar as he said that the US was the strongest economy in the world and that the Central Bank was close to reaching its employment and inflation target mandate. The comments from the Chicago Fed echoes views from other FOMC members including Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams. The Federal Reserve cut its rate hike forecasts from four to only two rate hikes in 2016 while also expecting inflation to remain below the 2.0% mandated target rate.

Last week, Gold prices rose steadily back to the $1250 handle after the Federal Reserve left interest rates unchanged and struck a more accommodative policy tone, widely considered to be an easing bias for the short term. On a year to date basis, Gold has gained over 18.0% within a span of just the first quarter of 2016 as Central banks around the world run out of tools to maintain an accommodative monetary policy while trying to stimulate growth in their respective regions. The declines off the $1250 level is likely to see further downside in Gold with the next main support identified at the $1200 level which is also a psychological level for Gold. Many institutional hedge funds and money managers have called the recent rally in Gold as unjustified and expect prices to fall here on with Goldman Sachs expecting Gold to resume its bearish trend and forecasting a decline to $1000.


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