UNITED STATES July 20 2017 6:33 PM
NEW YORK (Scrap Register): In what the National Australia Bank (NAB) described as a mildly optimistic forecast, gold is seen reaching the key psychological level of $1,300 only by the end of 2018.
“We are forecasting the price of gold to be around $1,235 an ounce by end 2017, rising to 1,300 an ounce by end of 2018,” NAB said in a report.
The main trigger restraining gold prices is the Federal Reserve’s monetary policy tightening cycle, wrote the bank’s economists, John Sharma and James Glenn.
But, the yellow metal might get a reprieve from its role as a hedge against risks, economists added.
“While an expectation for higher interest rates generates headwinds, gold’s safe-haven status, low correlation with other assets such as equities and the possibility of a re-emergence of financial market volatility will help underpin demand.”
Gold also has a chance to fall to $1,100, but only if there is a period of heightened calm. On the flip side, the precious metal can surge above $1,400 if a geopolitical or a financial shock hits the market.
Gold saw a strong start to 2017, rising 8% during the first half. Yet, the last two months have not been as positive, with gold dropping 2% in June and seeing additional weakness in July. August Comex gold was down $1.10 an ounce and trading at $1,240.80 at the time of publication.
“Strong U.S. payrolls data exert[ed] further weakness on gold. However, gold received some support following Fed Chair Janet Yellen’s semiannual testimony, which the markets interpreted as somewhat dovish,” NAB’s economists said.
The report also highlighted increased gold demand from India and China, but noted that there might be some easing in the second half of 2017 due to the launch of India’s new GST rule on gold in July.
Central banks’ demand for gold has been “subdued,” with only Central Bank of Russia noticeably raising its gold purchases, added NAB.
“Gold supply is expected to modestly ease in 2017, with Reuters expecting a reduced quantity of mined gold production,” the report said.