LONDON – Gold bulls hoping an anticipated rise in U.S. interest rates will paradoxically boost the metal’s price might just be disappointed, as the wider environment offers little to justify a rebound.
Gold has fallen 10 percent so far in 2015, hitting its lowest in nearly six years largely on speculation that monetary policy will tighten. In theory, higher interest rates weigh on bullion by lifting the opportunity cost of holding such a non-yielding asset.
While expectations of a rate rise have driven selling, some bulls say it is so well priced into gold that the reality of any slow and gradual rise from record lows after this week’s forecast increase could reinvigorate investment.
Although gold has managed to rise in the face of rising rates before, there is not enough support from other factors to push prices up this time around, analysts said.
“A lot of people are hopeful that the first rate rise will mark the beginning of a period where gold can start slowly to return to trading on more fundamental factors,” ICBC Standard Bank analyst Tom Kendall said.
“But it is hard to see what would really sustainably turn things around for gold in the short to medium term,” he added.
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