JPMorgan Positive On Gold As Markets Starts Long Bull Market

By Paul Ploumis (ScrapMonster Author)

May 12, 2016 01:12:26 AM

(Kitco News) - Gold price are up 20% since the start of the year but according to one major U.S. bank, the yellow metal has more potential and is just starting a “new and very long bull market.”

In an interview on CNBC, Solita Marcelli, global head of fixed income, currencies and commodities at JPMorgan, said that analysts are expecting to see gold prices go higher for the rest of the year. “$1,400 is very much in the cards this year,” she said in the interview.

Marcelli’s outlook is a significant shift since the start of the year, when the bank was bearish on gold, expecting to see lower prices, pushed down by higher interest rates and a stronger U.S. dollar.

The bank’s official forecast submitted to the London Bullion Market Association in January called for a trading range between $990 an ounce to $1,325 an ounce with an average annual price at $1,104.

Marcelli explained that with so many global negative nominal and real interest rates, gold is looking more attractive “every single day.”  It is estimated that $8 trillion in global sovereign debt has a negative yield.

“When you compare [gold] to negative-yielding assets, it pretty much has a positive carry,” she said. “Gold is a great portfolio hedge in an environment where world government bonds are yielding at historically low levels.”

Ultimately, gold could end up replacing sovereign bonds as the preferred safe haven among investors, she said.

Marcelli added that she is also optimistic on the yellow metal as she expects central banks will continue to buy the metal to diversify their foreign-reserves holdings.

While the JPMorgan analyst is bullish on gold for the year, she admits that the rally won’t move in a straight line. Marcelli said that she could see a healthy correction to $1,260 in the near term as speculative positioning in the futures market is at historically high levels.

Marcelli said that she is bullish on gold, expecting the next leg of the rally to be driven by retail investors moving into gold-backed exchange-traded products as risk-off sentiment continues to grow in the marketplace.

“Even though ETFs have picked up significantly in January and February, we are nowhere close to where the peak was in 2012,” she said. “I think people are watching the Fed and where the U.S. dollar will go.”

Although gold prices are below last-week’s 15-month high, the metal is seeing some modest buying pressure with June Comex gold futures last trading at $1,275, up almost 1% on the day.

Courtesy: Kitco News