Prices are likely to go as high as $1,350 an ounce sometime next year, after dipping below $1,200 as the Federal Reserve raises interest rates, likely in December, according to Bart Melek, the bank’s head of commodity research. Futures closed Friday at $1,255.50 an ounce on the Comex in New York.
Higher interest rates should initially lead to a stronger dollar, curbing demand for gold, he said in an interview in Singapore before the start of the London Bullion Market Association and London Platinum & Palladium Market annual conference.
Demand will be reignited as real interest rates, or yields minus inflation, remain low, keeping gold competitive with other assets, he said.
“By the end of next year, we will be testing the highs we saw early this year,” Melek said.
Gold rallied 25 percent in the first half of the year, partly on the Fed’s inaction in raising U.S. borrowing costs, along with uncertainty following the U.K.’s vote to leave the European Union.
Reference: Bloomberg
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