Gold continued to take a pounding on Thursday as the price of the precious metal came under attack for the tenth day in a row, reaching levels last seen 5 years ago.
The sinking price of gold is in keeping with other important commodities such as oil, silver and platinum, which all seem to facing bear market conditions as a result of the same fundamentals that are depressing the gold price.
Head of commodities research at Goldman Sachs, Jeffrey Currie, has weighed in with a very pessimistic view on the gold price saying it could trade below $1,000 per ounce. August gold (GCQ%, -0.96% ) was trading at $1,084.40 at 06:25 GMT on Friday.
During an interview by Bloomberg News on Tuesday, Currie said, “We think we are in a structural bear market, not only in gold, but across the commodity complex, as the individual commodity stories are reinforcing to one another, creating a negative feedback loop.”
His views are very much based on the continuing strength of the U.S. dollar (USD) which seems to be gaining momentum as reports of improvements on the U.S. economic front gather momentum.
“With the more positive outlook on the dollar, and with the debasement risk starting to fade, the demand to use gold as a diversifying asset against the U.S. dollar becomes less and less important”, Currie added during the interview.
Curries bearish view on gold hasn’t altered much during the past month. In a July 9 note to clients, he gave a twelve month target of $1,050 for gold.
Meanwhile, similar bearish comments were made by Fawad Razaqzada, technical analyst at Forex.com, who said in a note that the options and futures market is much larger than the actual physical market which drives prices lower. He added that another important, although intangible, factor most often forgotten is sentiment, which is currently decidedly bearish on precious metals.
The effect of the latest jobless numbers in the U.S. and the potential that it could have in spurring a rates hike by the Federal Reserve and the knock on effect on the gold price, drew comments from analysts speaking to Kitco.
Citi analyst David Wilson said, “The markets are all focusing on a September rate hike, so assuming that is when it occurs, you have to think that gold is going to remain under downward pressure up until that point.”
Bart Melek, head of commodity strategies for TD Securities in Toronto, told Kitco, “If you’re thinking about the Federal Reserve hiking rates in September maybe December, in real terms that could a larger impact than you may have thought.” He also noted that there is not enough inflation to attract gold buyers.