The next few weeks will be a crucial period for gold prices, and slight volatility is expected to indicate whether bullion prices will rise to US$1,000 (Bt34,100) or fall to $880 an ounce this year.
Gold traders have warned of volatility from the derivatives market rather than physical gold trading. Oil prices and the US dollar are still affecting gold prices more than real gold consumption is, but it is uncertain whether oil prices will continue to increase, because movements to date are believed to have been forced by hedging.
Gold Traders Association deputy secretary-general Kritcharat Hirunyasiri said that over the past month, there had been no clear signs of whether gold prices would rise or fall. Prices had moved in a range of $935 to $965 an ounce, but the range was narrowing, and it was expected that a clear direction would become obvious within the next two weeks.
Kritcharat said if the gold price broke through the $963-an-ounce level, it could rise to $980 and then $1,000 by year-end. However, if it failed to break $930 an ounce, the price could fall to $900.
"The dollar has more of an effect on gold prices," Kritcharat said. "For example, last Friday night the gold price increased $15 per ounce after the dollar depreciated from 1.422 to the euro 1.435, while oil prices made a smaller impact."
Although the golbal economy has begun to recover from the economic crisis, the US Federal Reserve is unlikely to adjust its interest rate in the short term. Inflation remains low and does not affect gold prices much even though inflation and gold prices are correlated, he said.
President Jitti Tangsithpakdi said it was possible gold would reach $1,000 an ounce this year, because the global economy had still not stabilised. Therefore, people are still investing in gold. As well, there is always high demand for gold at the end of a year.
However, gold prices will not swing as much as they did last year, because funds are investing in many markets, including equities, oil and gold, he said.
Secretary-general Pichaya Phisuthikul said that in the middle of the month, the gold price declined, but it increased again in the past week as oil prices rose to $60 to $70 a barrel.
Gold prices will remain volatile, he said. Normally, gold prices move contrary to the Equity Index, but recently when equities have risen, gold prices have sometimes risen, as well.
"The present gold price is not related to real consumption at all but rather affected by funds investing in the gold market.
"The recovery, which has been seen in stock markets like Wall Street, including oil-price increases, is still not certain. I believe the economy, which has been severely damaged, needs more time for recovery. Therefore, the present oil-price and Equity Index rises may be an illusion, because they show an adjustment much better than fundamentals," Pichaya said.
If oil prices and the Equity Indexes fall again, the gold price will also be affected. In Pichaya's view, gold prices are capable of peaking at $980 an ounce or bottoming at $880.
Meanwhile, Bloomberg said gold, little changed in London yesterday, might decline as a stronger dollar erodes the metal's appeal as an alternative investment. Palladium rose to its highest price in almost a year.
The US Dollar Index, a six-currency gauge of the greenback's value, rebounded from a two-week low, gaining as much as 0.4 per cent. Gold, which typically moves inversely to the dollar, added 1.4 per cent last Friday, the most this month.
"The market is likely to retreat towards $925 to $930 an ounce, provided the dollar rebounds from current lows," said VTB Capital analyst Andrey Kryuchenkov in London.
Immediate-delivery bullion climbed 45 cents, or 0.1 per cent, to $954.30 an ounce yesterday after advancing 0.6 per cent last week.
December gold futures rose 90 cents, or 0.1 per cent, to $955.60 an ounce on the New York Mercantile Exchange's Comex division.
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