Azernews.Az

By Bloomberg

If 2015 is shaping up as a bad year for gold bulls, next year holds more promise.

Until the U.S. Federal Reserve raises interest rates, expected by the end of the year, gold prices will stay under pressure, according to industry figures at a conference in Goa. Once that hurdle is cleared, the market should climb as low prices spur demand from traditional buyers in China and India.

A stronger dollar in anticipation of higher borrowing costs in the U.S. has weakened gold this year, from a peak of over $1,300 an ounce in January to about $1,160.

While prices may fall as low as $1,050 this year, the market could be back at $1,350 by mid-2016, said Michael Mesaric, chief executive officer of Swiss refiner Valcambi Suisse, speaking Saturday in the Indian port city. That’s a level not seen since March 2014.

Once uncertainty over interest rates is out of the way, gold prices will start to rise, said Philip Newman, director at London-based consultancy MetalsFocus. The probability that futures traders assign to a Fed rate increase in September has slid with December now viewed as more likely.

“It is not going to be like a straight line up from here, but there will be a recovery by end of year,” said Newman.

Factors that have pushed back expectations of a U.S. rate hike -- the hit to commodities and equities from China’s slowdown and surprise yuan devaluation earlier in the month -- have also served as a reminder of gold’s value as a place to park money amid wider market turmoil, he said.

Safe Haven

Amid fears of competitive currency devaluations following the yuan move, “people are going back to gold as a safe haven,” said Rajan Venkatesh, managing director of ScotiaMocatta India, a unit of Bank of Nova Scotia and a major importer of gold. He noted “a small increase in investments” into exchange traded funds “showing that people have started investing in gold.”

Holdings in the SPDR Gold Trust rose 0.4 percent to 678 metric tons as of Aug. 21, bouncing from their lowest since 2008. Bullion for immediate delivery declined 0.2 percent to $1,159.04 at 11:58 a.m. in Singapore, according to Bloomberg generic pricing.

Demand in India and China this year will be boosted by lower prices, according to Valcambi’s Mesaric, who estimates Chinese demand in 2015 at more than 1,000 tons and India’s at as much as 950 tons. India used 811.1 tons in 2014 and China about 974 tons, according to the World Gold Council.