For the second time in as many months one major Dutch bank has increased it forecast for gold. In a report published Tuesday, analysts at ABN Amro increased their year-end target for gold to $1,370 an ounce, up from their previous target of $1,300. For 2017 they see prices ending the year at $1,450 an ounce, up from the initial forecast at $1,300. They note in the report that a dovish Federal Reserve, a weaker U.S. dollar and negative real interest rates will all be positive for gold this year. “Recently, we revised our overall US dollar outlook. We now believe that the multi-year US dollar rally has peaked and that it will turn lower,” the say. “Over the recent years, the most dominant driver for gold prices has been the direction of the US dollar. As we are now expecting a lower dollar over the coming years, a crucial headwind is taken away.” As for the Fed the analysts say that even if the Fed does raise interest rates later this year -- a scenario they see as unlikely -- they will be perceived as being behind the inflation curve. “This should be positive for gold prices as investors will likely buy gold because of lower US real yields and as some may see gold as a possible inflation hedge. Therefore, gold prices will unlikely suffer next year when we expect gradual Fed rate hikes,” they say.
Reference: Kitco
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