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Barclays Dips Inflation Forecast, Gold To Trend Lower
Despite gold’s rebound last week, analysts at Barclays still expect prices to move lower this year. In the bank’s weekly Gold Delta report, the analysts say that signs of stabilization in China have reduced the yellow metal’s safe-haven allure. “We expect the gold price to resume its gradual decline if China volatilities remain contained,” they say. Another factor weighing on gold over the past year has been a strengthening U.S. dollar, and the analysts expect this strength to continue as well. “We expect the dollar to continue strengthening, particularly vis-à-vis emerging market currencies, as market volatility continues to trend up. The bank’s forecast for inflation, which is supposed to be price supportive for gold, is revised lower. “Renewed weakness in energy and commodity prices suggests that the drag on headline inflation will be longer lasting than previously expected. Our forecast for Q4/Q4 2016 CPI inflation is now 1.4%, down from 1.5%,” they say. “The most pronounced forecast change is in Q2 of this year, for which we now forecast core CPI inflation of 1.7% y/y, down from 1.9% previously.” According to the analysts, gold prices are expected to average around $1,075/oz in the first quarter and $1,054/oz for the year.
By Sarah Benali of Kitco News; sbenali@kitco.com
Second Issues of India’s Sovereign Gold Bond Starts Today
Monday January 18, 2016 9:17India will offer the second tranche of sovereign gold bonds from January 18 to January 22, the Reserve Bank of India said Friday. “The issue price of the Sovereign Gold Bond for this tranche has been fixed at ? 2,600/- (Rupees Two Thousand Six Hundred only) per gram of gold,” the central bank added. “The rate has been fixed on the basis of simple average of closing price for gold of 999 purity of the previous week (January 11-15, 2016) published by the India Bullion and Jewellers Association Ltd (IBJA).” In a research note Monday, analysts at Barclays said the tenor of the bond will be eight years with a five-year exit option. The interest rate, the analysts continued, is fixed at 2.75% of the initial investment value. “The first tranche of the sovereign gold bond received subscriptions of 915.953kg of gold, valued at 2.46bn rupees ($36.5mn). This is a limited amount compared with annual jewellery consumption of up to 1000 tonnes in India,” Barclays added.
By Sarah Benali of Kitco News; sbenali@kitco.com
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