By Kevin Martine
As gold expenses reached a seven-year high of US$ 1,600 per ounce today, some experts are preparing for the start of a brand-new growing market for the rare-earth component.
Specialists at Citibank Group Inc. think rates might strike US$ 2,000 per ounce in the next year.
Concerns over interest rate cuts by reserve banks, as well as financial headwinds triggered by the coronavirus, might trigger financiers to hedge stock market danger by buying gold, Citibank stated in a note Wednesday.
” While negative genuine yields are also helpful for equity markets, gold can further surpass on a risk market unwind must coronavirus threats effect supply chains and thus U.S. revenues momentum,” Citibank stated.
” We still expect fresh small 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 professionals concur that higher costs are here to remain.
” Gold has actually gotten in a new bull market and started to internalize geopolitical, political, trade and growth threats, which is an useful brand-new development, compared to its responsiveness over the previous 6 year bearishness,” mentioned Nicky Shiels, Metals Strategist at Scotiabank, in a research study report last month.
Shiels forecasted 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 kept in mind that political risks are high this year.
” Political/geopolitical & trade danger stays underpriced; that is particularly important into 2020, as election risk rises, the business cycle develops and the frequency of off-calendar geopolitical occasions likely remains high,” Shiels stated.
Nevertheless there are some risks that remain that might keep costs down, especially if Asian economies decline.
” Slowing physical need in Asia, particularly jewelry sales, which still remove approximately 45 per cent of annual world supply, is a bearish danger for bullion,” the Citibank report mentioned.
Shiels likewise kept in mind risks, recommending that a decrease in stock market volatility as well as the possibility of more consistent around the world trade might keep need low.
” Chinese physical investor interest has actually also suffered large losses in the 2nd half of 2019 due to issues over additional yuan depreciation moderating given trade de-escalation and the stage one deal,” Shiels stated.
” The uncertainty concerning when the international supply chain will return to typical is most likely to continue to squelch trader and investor risk hunger for at least the near term. That’s bullish for the rare-earth elements markets,” Kitco Metals senior professional Jim Wyckoff stated in a note.
Showing favorable investor belief towards bullion, holdings of the world’s biggest gold-backed exchange-traded fund, SPDR Gold Trust, increased to their highest given that Nov. 11, 2016 on Tuesday.
With a file from Reuters
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