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Gold likely to see speculative unwinding: S&P Global Platts survey

London — Market participants expect the US dollar gold price to head lower over the next week, with signals from the US Federal Reserve on a possible rate hike and speculative unwinding the likely key drivers, the S&P Global Platts Gold Sentiment Survey indicated this week.

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The poll of 20 industry participants showed that the majority of those who responded were bearish on the outlook for the gold price over the course of the coming week.

This is the second week of the market being polled, and like the first week it shows lower price forecasts.

On May 20, the date of the inaugural survey, saw the London Bullion Market Association Gold Price settle in the morning at $1,256.50/troy oz.

Article Continues below...

On May 26 the price was discovered at $1,226.65/tr oz, in tune with participants' predictions.

One said that he sees the price flat between $1,220-$1,260/tr oz, another suggested a range of $1,190-$1,230/tr oz.

Only one participant said the price could go higher, although the forecast trading range was fairly wide at $1,206-$1,256/tr oz.

The vast majority continued to feel that US macroeconomics will be a key factor driving prices lower, leading to increased long liquidation.

Looking at physical markets, most predicted steady demand.

Physical gold flows continue to be diverted to London, with demand in the world's number one and two physical consumers, China and India respectively, reported very weak, a theme throughout 2016 so far, sources said this week.

Flows to London vaults would suggest Exchange Traded Fund activity, with the international price this year supported largely by investor interest both in Europe and the US.

Platts has previously reported that 2016 has so far been the worst year in memory for demand to India.

Platts Gold Premium India 995 was assessed at a discount of $12/tr oz Thursday, compared with minus $10/tr oz on Wednesday.

Looking at ETF flows, Swiss bank UBS said Thursday that latest data showed global ETF holdings increased 0.05 million oz Wednesday, from Tuesday.

This took the total to 63.64 million oz, a 13.60 million oz year to date increase.

The premium paid above dollar spot in China, the world's number one physical gold producer, consumer and importer, has been reported around $0.50-$2/tr oz this week.

In Dubai a discount of around $2-$3/tr oz has been reported, with Turkey around a premium of $0.75/tr oz.

The Turkish gold market was in a confident mood this week, despite seeing demand fall to record lows in the first half of 2016, as dealers and traders look ahead to the summer buying season and participants remain bullish about the industry.

"It has been a very difficult year, and footfall has been increasingly down since January," a physical dealer at the centuries-old Grand Bazaar in Istanbul said.

"But we are all very confident the summer will bring the people in -- as it always has."

The differential paid to the international spot price was heard at a discount for many weeks this year, very rare in Turkey, but has recently returned to a $0.50-$1.00/oz premium.

According to Borsa Istanbul, traded gold volumes are at their lowest level since 1995, with less than 90 mt expected this year compared with 255 mt in 2015 and 241 mt in 2014.

--Ben Kilbey, ben.kilbey@spglobal.com
--George King Cassell, george.king.cassell@spglobal.com
--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com