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Dollar gold price likely to head higher over next week: S&P Global Platts survey

Houston (Platts)--13 Feb 2017 1012 am EST/1512 GMT


US President Donald Trump's tax-cutting talk nudged the price of gold lower this week, but the dollar gold price is expected to head higher over the next seven days, respondents to the S&P Global Platts Gold Sentiment Survey said Friday.

The price has had a fairly roller coaster week, the London Bullion Market Association Gold Price settled Monday morning at $1,221.85/oz, hit a high of $1,242.10/oz Wednesday afternoon and finished the week Friday afternoon at $1,228.30/oz.

Comments from President Trump acted as the major factor behind the choppy trade this week.

Related: Find more content about Trump's administration in our news and analysis feature.

Ole Hansen, head of commodities strategy at Saxo Bank, said: "Gold hit a three-month high [this week] as political uncertainty spread from the US to Europe. After almost hitting our short-term target of $1,250/oz, Trump's renewed talk of tax cuts helped send the price [lower] looking for support."

Hansen added that a correction was overdue, but that underlying demand "has improved, with hedge funds showing signs of returning."

Most respondents to the survey suggested US dollar moves and macro conditions will have the biggest impact on the gold price.

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Over the next two-to-four week period almost all believe that the price of gold will head higher.

The average forecast for the next seven days is $1,220-$1,250/oz, compared with $1,180-$1,230/oz last week.

"Gold's strong performance over the last two weeks, which has seen prices reach three-month spot highs of $1,245, has given way to profit-taking in the paper markets. [Late Thursday afternoon] close to half a million ounces were dumped on the COMEX in little over a minute, pushing prices lower and triggering waves of selling," Mitsubishi analyst Jon Butler told clients.

Looking at the physical markets, it was a mixed bag for the world's number two consumer, India, largely in tandem with the dollar price fluctuations.

Still, there were signs of a pick-up in demand, with talk of dore -- a semi finished gold/silver alloy -- being redirected back to the country after a year of near non-existent demand in 2016.

Premiums to the dollar spot price fluctuated between flat to plus $2/oz.

"We've done a bit out to India this week -- not outstanding, but healthy enough. In Dubai there's a small discount. For China, I've not heard much, there doesn't seem to have been a big pick up after Chinese" New Year, said one physical trader in London.

However, the main talking point of the week was that London gold market wholesalers are looking at forming a new body of representatives to deal directly with issues relating to the operations and taxation of the UK bullion industry.

There are around 10-12 wholesale entities currently in negotiations to set up the new body, sources told Platts.

One source said the purpose of the organization would be to deal directly with any issues facing the wholesale coin and bar market in the UK.

"There's a lot of confusion around current taxation, and the impact Brexit will have on the market," said one senior source. "This body will be formed to lobby for clarity and consistency."

--Ben Kilbey, ben.kilbey@spglobal.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com

Platts Market Data - Metals provides the latest ferrous and nonferrous benchmarks and price assessments from both S&P Global Platts and The Steel Index (TSI).

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