19.09.2014 - Demand for gold will soon begin to grow
The price of gold is consolidating near the level of 1220 dollars per troy ounce. The reason for the the fall of gold is the strengthening of the dollar and reduced geopolitical risks associated with the Ukrainian crisis, the confrontation in Iraq and the referendum on independence in Scotland, where voted to keep country within the UK. We forecast growth in demand for the metal from Asian consumers in connection with decrease of price to the levels of 1200-1180. These markers are close to the cost of gold production and the potential of further reduction is minimal. Additional stimulus for growth in demand for gold can be a significant reduction on the stock markets. We recommend to gradually accumulate long positions and to fix short ones.
The price for US benchmark Light Sweet crude oil resumed its decline. The reasons for the fall are the strengthening of the dollar to a four-year high, and rising inventories of crude oil, which last week increased by 3.7 million barrels. It should be noted that the fall in prices can be stopped in case of decrease in oil production by OPEC countries. Previously reported the possibility of reducing the supply by 500 thousand barrels per day to 29.5 million barrels per day. It is worth noting the drop in supplies from Libya by 200 thousand barrels due to infrastructure problems and the strike of oil workers in Nigeria. Due to the stable weak demand in Europe and the growth of production in the United States, we maintain a medium-term negative outlook, but there is a low potential for the further fall.