Commodity Trade Mantra

Gold Prices Can Test $2,000 in 18 months on Weak Dollar & Geo-political Tensions

Gold Prices Can Test $2,000 in 18 months on Weak Dollar & Geo-political Tensions

Gold Prices Can Test $2,000 in 18 months

Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital had presented an extremely bullish view on gold prices in a July 2016 interview with CNBC, predicting at the time that it could hit all-time highs in the subsequent 18 months.

Back then, Gold was trading at $1,340. On Wednesday, the precious metal was trading at about $1,289.

Speaking to CNBC’s “Squawk Box” on Wednesday, he defended the commodity, saying that “from a fundamental point of view, I think we’re going to get a break out on the upside.” Still, he acknowledged that gold prices had been basically flat over the last year.

“Look, the markets don’t always move (too well) in the short term, but I think in the medium term it does,” he said, pointing to gold’s strong historical performance. “I think this trend will continue until we start seeing again stability coming into the financial system and government behavior.”

Part of the bullish case for gold prices, according to Kiener, is an emerging distrust towards U.S. geopolitical behavior, and accelerating physical gold purchasing in the rest of the world.

While some may be discussing the dollar or equities’ impact on gold prices, Kiener said the driving factor behind the metal’s price will become “the loss in trust of leadership and governments and financial markets.” With only a small percentage of the global assets currently devoted to gold, Kiener said it would make sense for more investments to pour into such alternatives.

Looking to the medium term, within eight to 18 months, Kiener said gold’s first resistance is between $1,400 and $1,450, and if that breaks, then the metal would test its all-time highs.

In a week dominated by mounting geopolitical tensions, “safe-haven” assets such as gold and low-risk government bonds rose. The metal price increased to about $1,289 an ounce from a low of $1,198 in March. – Vaibhavee Sinha

Gold prices may ‘sky-rocket’ on weak dollar and rising geo-political tensions

A strong run in gold prices could continue as the US dollar weakens and investors seek safe-havens in the face of increasing geo-political risks, according to Prestige Economics.

The price of gold bullion has risen 11% this year as investors look to the commodity as a refuge from the uncertainty surrounding US President Donald Trump’s political and economic policies.

Gold bullion rose 0.8% to $1,296 per ounce on Monday, its highest level since 9 November, but has since fallen back. Bullion is currently trading at $1,287 per ounce.

Jason Schenker, founder of Prestige Economics told Bloomberg: “Gold is going higher here. We see a gradually weakening dollar on trend.

“Although we expect two more rate hikes this year – September, December – and four rate hikes next year, what we also think is that a lot of that is priced in.”

Markets are responding to geo-political tensions across the globe, especially military actions from the US.

Last month, investors went into risk-off mode as opposition from his own party meant Trump failed to pass his healthcare reform bill in Congress, prompting a fall in the US equity markets.

Meanwhile, this month, the US bombed Syria and the Islamic State in Afghanistan,while Trump said he was willing to consider a military strike on North Korea after a ballistic missile launch by the country failed.

Furthermore, in a survey conducted by Bloomberg last week, analysts were the most positive on gold prices since December 2015.

Schenker added: “If we get weak Q1 GDP numbers, equities are going to take a big hit, the dollar is going to take a big hit and gold prices are going to sky-rocket.” – Tom Eckett

 

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