Gold Prices to Rise Further on Fed Reserve's Dovish Stance and Iraq Crisis

Gold prices to rise next week.Reuters

Gold prices are set to rise further next week, with a dovish US central bank and the conflict in Iraq expected to lend support to the yellow metal.

As many as 18 of 26 analysts polled in a Kitco Gold Survey said they expected gold prices to trade higher next week, while six predicted that prices will drop and two forecast prices to trade sideways.

Traders will want gold to stay above the psychologically important $1,300 an ounce level.

Ole Hansen, head of commodity strategy at Saxo Bank, said: "The triple combination of a slightly more dovish Fed, the crisis in Iraq and the technical break back above the 200-day moving average leaves the door open for higher prices next week..."

Adrian Day, who runs Adrian Day Asset Management, said: "The gold market has finally woken up to the fact that the [US] Federal Reserve is going to continue to be very accommodative. Fed Chairwoman Janet Yellen herself [made it] clear that any interest hikes are some time into the future and inferred that higher inflation is not a real concern of hers. So gold jumped after the [FOMC] meeting put out its statement and continued rallying. Iraq supports gold but is not the primary reason gold has moved up."

Gold Ends Higher

Gold futures for delivery in August finished at $1,316.60 an ounce on 20 June.

Prices jumped 3.3% for the week as a whole.

Gold rose to a two-month high of $1321.59 on 19 June, 3.45% stronger than its close on 18 June, when prices skyrocketed following the Fed policy statement, which showed the world's most powerful central bank is not yet ready to sound more hawkish despite recent growth and inflation upsides, triggering increased short-covering in the metals.

The World Gold Council WGC), the marketing body for the industry, said on 18 June it will host a meeting "to explore reform of the London Gold Fix", an age-old pricing of gold twice daily that has drawn severe criticism lately for its alleged lack of transparency.

WGC said representatives of bullion banks, refiners, exchange traded funds and other gold investment product sponsors, exchanges, industry bodies, central banks and mining companies will attend the meeting, scheduled for 7 July.

The London gold fix is used to determine the prices of the precious metal the world over.

The UK's Financial Conduct Authority (FCA) is expected to attend the meeting.