Golden days for bullion expected to wane further as investors await Fed’s rate decision – by John Shmuel (National Post – September 11, 2015)

The National Post is Canada’s second largest national paper.

Gold prices managed to snap a 10-day losing streak on Thursday, but the bad mood hanging over the precious metal hasn’t dissipated as a slew of banks cut their price targets this week.

Bullion prices are in particular focus this month as the U.S. Federal Reserve will hold what is viewed as a particularly important interest rate announcement meeting.

Some predict the Fed could move next week to hike its benchmark rate, which has been near zero per cent since the financial crisis. Such a hike would likely strengthen the U.S. dollar and drive gold prices down since they tend to move inversely.

“We expect investors to further reduce net long positions in the wake of Fed rate hikes this year and next year and a higher US dollar,” said Georgette Boele, head of FX and precious metal strategy at ABN Amro, a Dutch bank.

ABN on Wednesday cut its forecast for gold prices, and now expects prices to fall to US$1,000 by the end of the year and to US$800 by 2016. ABN joins other gold bears such as BNP Paribas and Goldman Sachs in forecasting negative returns for the precious metal in the coming years.

Gold has been steadily trending downwards since 2011, when the metal peaked at a price of more than US$1,900 an ounce.

Many investors bought the precious metal as a shield against the wave of volatility that hit the world following the financial crisis, as well as a way to hedge against the possibility that loose central bank monetary policy would create runaway inflation.

But the spike in inflation many gold investors had sought to protect against never materialized.

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