The worst may not yet be over for gold investors. According to a new gold price forecast by Morgan Stanley, spot rates have a lot more room to fall.
This week has been a tough week for the yellow metal. Gold dropped 6.3% over 10 days of losses. On Monday, July 20th, gold prices reached a five-year low of $1,080.
According to the investment bank, “The metal is more likely to trade at about $1,050 an ounce.” However, the report noted prices could fall as low as $800.00 an ounce before the market finally finds a bottom. (Source: Bloomberg.com, July 23, 2015.)
Analysts cited to headwinds crimping gold prices. First, Federal Reserve Chair Janet Yellen reiterated last week that the central bank will increase the federal fund rate this year. As the central bank prepares to raise interest rates, investors would lose interest in assets like gold that don’t make any yields, moving towards U.S. dollars.
Second, China is adding fewer ounces to its gold reserves than originally anticipated. The update from China, lower risks from the Greek debt crisis, and higher rates could all be bearish for gold.