By Kevin Martine
As gold costs reached a seven-year high of US$ 1,600 per ounce today, some experts are anticipating the start of a new thriving market for the rare-earth aspect.
Professionals at Citibank Group Inc. believe costs may strike US$ 2,000 per ounce in the next year.
Worries over interest rates cuts by reserve banks, in addition to financial headwinds set off by the coronavirus, may trigger investors to hedge stock market danger by acquiring gold, Citibank mentioned in a note Wednesday.
” While negative genuine yields are likewise helpful for equity markets, gold can even more exceed on a danger market relax must coronavirus risks impact supply chains and thus U.S. profits momentum,” Citibank stated.
” We still expect fresh nominal highs of US$ 2,000 per ounce to be breached in the next 12 to 24 months.”
Area gold was up 0.3 percent to US$ 1,60644 per ounce.
Other experts concur that greater costs are here to remain.
” Gold has actually gone into a new booming market and begun to internalize geopolitical, political, trade and growth threats, which is an useful new development, compared to its responsiveness over the previous six year bear market,” stated Nicky Shiels, Metals Strategist at Scotiabank, in a research study report last month.
Shiels prepared for a typical expense of US$ 1,600 over the next year, with a trading variety in between US$ 1,500 and US$ 1,700, and bore in mind that political risks are high this year.
” Political/geopolitical & trade danger remains underpriced; that is specifically crucial into 2020, as election risk rises, the business cycle develops and the frequency of off-calendar geopolitical events likely remains high,” Shiels mentioned.
However there are some dangers that remain that may keep costs down, especially if Asian economies decrease.
” Slowing physical demand in Asia, especially precious jewelry sales, which still remove roughly 45 percent of annual world supply, is a bearish threat for bullion,” the Citibank report stated.
Shiels similarly bore in mind risks, advising that a decrease in stock market volatility in addition to the possibility of more steady around the world trade may keep need low.
” Chinese physical financier interest has actually also suffered large losses in the 2nd half of 2019 due to concerns over additional yuan depreciation moderating given trade de-escalation and the phase one deal,” Shiels mentioned.
” The uncertainty regarding when the global supply chain will go back to normal is most likely to continue to squelch trader and financier risk cravings for at least the near term. That’s bullish for the precious metals markets,” Kitco Metals senior analyst Jim Wyckoff stated in a note.
Showing beneficial investor belief towards bullion, holdings of the world’s biggest gold-backed exchange-traded fund, SPDR Gold Trust, increased to their biggest considered that Nov. 11, 2016 on Tuesday.
With a file from Reuters
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