Baku. 2 October. REPORT.AZ/ If price of gold in world markets drops below $ 1,260/ounce, it is expected to fall more rapidly.
Analytical Group of Report News Agency informs, the fact that price for gold remains stable for some time will cause a decline in medium and long-term prospect.
Analysts believe that the main reason for decline in gold price is the expected increase in discount rate by the US Federal Reserve System (Fed) in December. That is to say, gold is known as a financial asset that does not generate any additional revenues and is simply a hedging instrument. After the increase in Fed discount rate the interest of financial market participants in government securities is expected to raise. Also, reducing the balance of central banks in developed countries will result in a decrease in liquidity on the global financial market, which will cause interest to the gold as an alternative financial instrument. In addition, central banks in some countries are experiencing problems with the balance of payments, reducing their gold reserves.
Analytical Group says, growth in interest rates and acceleration of process of balance reduction can increase gold sales.
Even though the price of gold will try to stay above $ 1,200/ounce by the year end, the downward trend will continue since 2018, and by 2020, gold will decline to around $ 800/ounce.
Notably, in many countries, demand of population is expected to decrease with the help of a financial crisis.