First-time investors have been warned against buying gold by experts who say the metal may continue to come under pressure in the next few months.
Gold hit $1,030 an ounce – an all-time high – in March but has since fallen. Gold futures closed 90 cents lower on Monday on New York Mercantile Exchange because of pressure from a stronger dollar and a retreat in oil prices. But the metal held its ground above $880 and ounce. Experts believe gold is unlikely to rally significantly in the near future as its price comes under increasing pressure. "I would urge all first-timers to refrain from getting into the bullion market," Walter de Wet, an analyst at Standard Bank in Johannesburg, told Emirates Business.
"If you are already in it then take into consideration the levels to which gold may fall – and I anticipate that to be around $850 an ounce in the near future. If gold comes down to $800 an ounce then we will see a lot of liquidation."
The dollar has traditionally been seen as a hedge against inflation, which is becoming a global problem – but de Wet disagrees with this approach. "Gold is a hedge against the dollar's weakness," he said. "The dollar has bottomed out and we expect it to recover and even the credit markets look better than last year, so there are valid reasons for gold to show signs of weakness. Currently gold is well supported by high crude oil prices but if they fall then a gold price well below $800 an ounce seem quite realistic. Below $800 an ounce is a good level for investors to get into the market again."
Julian Phillips, an analyst at GoldForecaster.com, said: "We are heading into the quiet season for gold. But at any moment reports of another systemic fracture in the financial system could liven it up, as happened last year when the sub-prime crisis emerged."
$850 The expected price of an ounce of gold in the near future
$1,030 An all-time high gold price in March. The price has since fallen to $880