A tightening Federal Reserve interest rate policy and a strengthening U.S. dollar are weighing on gold and precious metals exchange traded funds, but the sell-off may open opportunities.
For now, the precious metals market may continue to weaken as the greenback continues to appreciate.
“Looking at CFTC futures positioning, which is indicative of investor sentiment, it highlights that investors are not yet at peak bullishness for the US dollar nor are they at peak bearishness for gold that was witnessed at the end of 2015, just after the Fed’s first rate hike,” James Butterfill, Head of Research & Investment Strategy at ETF Securities, said in a note. “If we assume similar levels of sentiment for both the US dollar and gold then it suggests that gold could fall by 19% by year-end, bringing the gold price close to US$1070.”
Comex gold futures were trading at $1,133.0 per ounce Tuesday. As gold and precious metals continue to weaken, investors may find an opportunity to jump in.
“A pullback is an entry point for them to come back,” Maxwell Gold, Director of Investment Strategy at ETF Securities, told ETF Trends in a call.
Gold argued that gold prices could rebound and become more fundamentally driven going into 2017 after a rise in inflation and global economies rebound.