• Gold poised to resume bull market run in 2019-2020
Precious metal gold, which has been mostly ignored by investors this year, is in the midst of a solid recovery in
Gold prices were solidly higher this week, hitting a five-week high on Thursday at $1,267 per ounce.
According to the economic research consultancy Capital Economics, the end-2019 target for the yellow metal is $1,300 an ounce, followed by the $1,400 level at the end of 2020.
They explained that the optimistic outlook was based on investor interest returning to the gold space as the end of the Federal Reserve’s tightening cycle approached.
“We are forecasting an end to Fed tightening by the middle of next year. In fact, the dramatic fall in market expectations of Fed tightening over the past six weeks has been a key factor in the recovery in gold prices,” the report said.
It suggested that in 2020 the Fed will start cutting rates more than the markets are pricing in at the moment, which should boost prices at the end of next year.
The economists pointed to weaker US dollar as another major driver for gold in 2019. It has held back and pressured down gold prices for most of this year, they explained.
Demand for safe-haven assets should do well next year, Capital Economics added, noting that ETF holdings are expected to rise back above 80 million ounces.
• Commerzbank: Gold To Hit $1,350 In 2019
Commerzbank looks for most precious metals to strengthen in 2019, with the exception of high-flying palladium, which the German bank says may be due for a correction lower.
"Precious metals prices are likely to rise next year, chiefly on the back of a weaker U.S. dollar as the Fed rate-hike cycle comes to an end,” the bank said in an outlook report released Wednesday.
Commerzbank forecasts gold will average $1,250 an ounce in the first two quarters of 2019, but then rise to $1,300 in the third quarter. "We expect the gold price to increase to$1,350 per troy ounce by the end of 2019,” the bank said.
Silver was called to "perform comparably to gold,” although not necessarily outpacing the metal, as often happens in bull markets. Silver was forecast to average $14.50 in the first quarter, $15 in the second and $15.50 in the third.
• Gold Forecast 2019: Focus on US real interest rates
Gold may face bearish pressures, especially in the first half of 2019, as the real interest rates in the US are likely to rise.
The haven demand for the US dollar dropped in the final quarter as the US-China trade tensions eased. Further, markets scaled back expectations of Fed rate hikes in 2019 on fears that the fiscal stimulus would wear off in 2019 and the economy could fall into recession. Moreover, a section of treasury curve (5s2s) inverted in November, triggering recession fears. All this helped gold stage a recovery rally to 200-day MA of $1,257.
Factors that could support gold in 2019
- Real rates turn negative: Gold tends to perform well when the inflation rate is higher than the nominal interest rate. Inflation may rise well above interest rates if the US-China trade war escalates, restoring gold's appeal as a store of value.
- US economy underperforms: The haven flows into the US seen in 2018 will likely reverse, pushing the yellow metal higher, if the world's largest economy underperforms the global economy.
- Market volatility: Hedging demand for gold may rise if the equities, commodities and EM currencies remain volatile.
Reference: FXStreet, RT, Kitco
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