UNITED STATES June 01 2017 12:22 PM
NEW YORK (Scrap Register): The gold market is headed for its second neutral monthly close since December, but one firm sees potential for the yellow metal despite a looming U.S. interest-rate hike.
In a report Ole Hansen, head of commodity strategy at Saxo Bank, said that he sees potential for gold prices to push above $1,300 an ounce in June as the Federal Reserve hikes interest rates for what could be the last time this year.
“We see further upside to gold, with a risk of a dovish U.S. rate hike on June 14 and continued support from political risks related to elections in Europe and uncertainty around U.S. President Donald Trump,” he said.
The move Hansen is expecting to see would be similar to what happened following the Federal Reserve’s March monetary policy decision, which analysts saw as a “dovish hike.” The central bank raised interest rates by 25 basis points but strongly emphasized the gradual trajectory and a “quite low” neutral Fed funds rate.
Currently, a June rate hike is pretty much widely expected, with 30-day Fed fund futures pricing in a 91% chance, but the outlook for a third move at the end of the year remains uncertain. Markets are pricing in a less than a 50% chance of a third hike by the end of December. Analysts have noted that hesitancy for a third rate hike this year could be positive for gold.