Weak Dollar, Global Political Tension Behind Potential Climb In Gold

According to Prestige Economics LLC, amid mounting geopolitical risk, as the equity markets decline, dollar weakens and future U.S. interest rate increases are already priced in, gold will extend its rally.

“Gold is going higher here,” Jason Schenker, president and founder of the Austin, Texas-based firm, said in a television interview on Monday. “We see a gradually weakening dollar on trend. Although we expect two more rate hikes this year — September, December — and four rate hikes next year, what we also think is that a lot of that’s priced in.”

Partly because of the unpredictability of President Donald Trump’s political and economic policies, bBottom of Form

ullion is up 12 percent this year as investors seek a haven. tension ratcheted up at the weekend after Trump was said to be willing to consider “kinetic” military action, including a sudden strike on North Korea, after a ballistic missile launch by the country failed and the U.S. bombed Syria and Islamic State positions in a remote area of Afghanistan this month.

According to Bloomberg generic pricing, noting the highest level since Nov. 9, and traded at $1,288.87 by 3:53 p.m. in Singapore, spot gold climbed as much as 0.8 percent to $1,295.56 an ounce on Monday. From a high reached in January, the Bloomberg Dollar Spot Index has sunk about 4.7 percent and fell 0.3 percent.

According to data compiled by Bloomberg, along with ABN Amro Bank NV, ranked the top gold price forecaster for the second quarter of 2016 was Prestige Economics, an independent market research firm.

Since December 2015, traders and analysts were the most positive on gold, revealed a Bloomberg survey last week. Schenker, who sees further downside risk for equities as being supportive to gold, said that from a technical viewpoint, breakouts above the Bollinger bands in the past few sessions are a “critically bullish sign.” He’s also watching for first-quarter U.S. economic growth on April 28.

“If we get weak 1Q GDP numbers, equities are going to take a big hit, the dollar is going to take a big hit and gold is going to sky-rocket,” he said.

However, others are not as bullish.

According to Pictet Wealth Management, which flagged a possible retreat toward $1,100, as the Federal Reserve boosts interest rates, inflation remains contained and geopolitical risks ease, gold may decline this year. In its three, six and 12-month outlook for gold, an April 12 report from Goldman Sachs Group Inc. showed that it is targeting $1,200, $1,200 and $1,250 respectively.

(Adapted from Bloomberg)

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