‘Gold is the only safe haven that has really worked this year’
However, Rennie isn’t throwing in the towel just yet, noting that gold has been the only safe haven that has “really worked for investors as a traditional safe haven this year.”
Gold working as a safe-haven asset is bringing in more demand, Rennie explained, adding that it is what kept the prices well supported this year.
“Through 2017 gold has been in a steady uptrend. We started the year below $1,150, we’ve seen gold approaching $1,300 and come back from that level a couple of times (once in April and once in June),” he said. “But, we remain in an uptrend and I think the underlying technical picture and the fact that it is still working as a safe haven has arguably increased short-term demand for gold.”
Rennie, however, is not particularly optimistic that gold could breach the $1,300 level and sustain it, mainly due to the Fed proceeding to normalize monetary policy. He said he projects rate hikes in September and March, and by the end of the year, Rennie expects the Fed to move towards normalizing its balance sheet.
“We continue to think that the current level of activity in the U.S., particularly unemployment and underemployment levels are consistent with approaching full employment, and that should pick up wage inflation,” he said.
There are increasing risks of other central banks beginning to normalize monetary policy as well, Rennie noted.
“If I look at global liquidity and global policy setting, the tide began to turn and I am not sure that really favors a significant move in gold north of $1,300 through this year,” he said.
Reference: Kitco
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