Start accumulating gold though price may dip some more: ANZ

Now is a good time to accumulate gold though the price might fall further, Victor Thianpiriya, Head-commodity research at ANZ Research said. Gold prices are quoting at a five-year low in anticipation of the dollar strengthening further if and when the US Federal Reserve hikes interest rate.  On Monday, prices of the yellow metal fell 4 percent in the Chinese market.Thianpiriya told CNBC-TV18 that gold will stabilise around USD 1080 per ounce in coming days. However, he maintains a cautious stance on the commodity for now. "I would take a bit of a cautious approach over the next 12-18 months," Thianpiriya said, adding, "I think the market is still not clear cut on when the Fed will raise interest rates."Daniel Hynes, Senior Commodity Strategist at ANZ Research said the lack of investment demand from safe haven buying has lead to further downfall in the gold market. "The market is looking for supply cuts at the moment due to huge oversupply that we have got globally," Hynes said on crude prices, adding: "when you get a producer coming back in like Iran, it just presents further headwinds for the markets."He expects further fall in crude prices to USD 5 to USD 10 for supply cuts.Below is the transcript of Victor Thianpiriya and Daniel Hynes's interview on CNBC-TV18.Q: That was the expectation yesterday at least from the last remaining gold bulls as it were - that this was a sudden one-off sale in Shanghai and maybe some correction will come. We do not see that. What is your near-term range in target of gold?Thianpiriya: That is a very interesting question and it is quite telling that price action in gold overnight. I was looking for whether the traders in the Western hemisphere were likely to keep on the sidelines or see this as a bit of a buying opportunity. It looks like the former has prevailed. The way I look at the gold market, the price structure, the way the price action has moved is really made the technical outlook quite soft. I think we are headed just a little bit lower. We had a price target of USD 1,100 in the short-term and that was clearly reached yesterday. We are headed probably a little bit lower. The next level of clear support that I can see is USD 1,080 per ounce and we should get a bit of a bounce off that level.Q: For the Indian community, or a investor, gold is sentiment buy. We buy gold jewellery for our weddings, etc. so a lot of people are come up with queries on whether gold at this stage after the big sell-off is a good buy for the longer-term. If you had to give us a three to five year view on gold, do you think the worst is over or do you see much more derating for a metal like gold?Thianpiriya: What we have telling investors and particularly investors with a long-term time horizon, is that now is a great time to be accumulating gold. I would take a bit of a cautious approach over the next 12-18 months. I think the market is still not clear cut on when the Fed will raise interest rates. That is still going to have a negative impact on gold and certainly that has been a big driver of the climb in the gold price over the past 12 months. Having said that, once we do get past the US dollar strength, which is still occurring this cyclical strength in the US dollar. I think that gold has a very good chance of rallying back. I would urge caution over the next 12 months and I would recommend that investors maintain sort of an accumulation phase.Q: Just for academic interest, what went wrong with gold suddenly? We did not have yesterday, any fresh announcement in terms of the Fed or any statement coming out. We did not see any big spike in the dollar index yesterday. Why did sentiment turn so suddenly negative yesterday?Thianpiriya: That is a 100 percent correct. I think it is a combination of a couple of things. If we look at how the market traded down and the sort of volume that went through on the exchanges. It was not just the Shanghai gold exchange. It was also on the Commodity Exchange (COMEX) as well. Significantly, higher volumes than usual. Going to the time when the market generally has quite low liquidity, I mean, the traders are still rubbing their eyes at that time. It depends also on holidays. So, we have got a period of low liquidity, and we have got what I think is speculative shorting activity high volume selling in the time of low liquidity and to me that has got all the hallmarks of speculative shorting. I guess the second thing was that gold did actually fall quite sharply in the New York session on Friday as well and it could have been a bit of a reaction in Asia to that and we were sitting at that 1,130 level which was a big support and come with all the opportunity to push right through that.Q: How much further downside do you see for gold prices? Hynes: They have obviously fallen quite a bit over the past week, but they have been on a downward trend for a while now and certainly the risks are skewed to further downside. For us, we do not think we will see too much further from here. I am saying that we have hit some key support levels, but clearly with the US moving towards raising interest rates and thus stronger US dollar, there is certainly going to be a lot of pressure on investment demand which is obviously herding prices at the moment.Q: That is interesting point because this is clearly in a bear market of its own. Do you think it has now lost the status of the safe haven buying because even when we had this big turmoil in equity markets, we did not see any kind of rally in gold?Hynes: It has been absent from Gold for a little while and that is obviously being quite a bearish sort of flag from our point of view. With a lot of that uncertainty passing now, we are seeing the bears really take hold and push this market in a low liquidity type situation such as Asian trade where we saw the moves yesterday. So, certainly I suppose the lack of investment demand from safe haven buying has certainly allowed the bears to really push this market down even further.Q: What is your sense in terms of oil prices now, especially Brent?Hynes: We feel that the initial collapse in prices we saw in the announcement of the Iranian deal is more indicative of where the prices will head in the shortest term. Despite the news emerging that the lifting of sanctions probably won’t result in any Iranian oil hitting the market this year. Ultimately, the market is looking for supply cuts at the moment due to the huge oversupply that we have got globally. So, when you get a producer coming back in like Iran, it just obviously presents further headwinds for the markets. From our point of view, we think that oil prices will have to push further south from here, may be USD 5 or even USD 10 lower to really get the supply cuts that the markets are looking for.