AFTER a Northern hemisphere summer reverie, gold is expected to resume its bull run with the metal’s price forecast to test $3,700 per ounce.
“We expect gold’s rally to continue as its investor base widens and allocations grow,” said Joni Teves, a metals strategist for Swiss bank, UBS. “We see upside risks for gold and silver, with our bullish scenario pointing to a move towards $3600/$3700 and $44/$45, respectively,” she said in a report on Tuesday.
The spot price of gold rose 0.9% to $3,508.70 a troy ounce during early trading in Asia, before paring gains to trade at $3,497/oz.
Renewed interest in gold, following several months of consolidation over the Northern hemisphere summer, was owing to a range of factors rather than a single cause, adding to the strength of the metal’s prospects, said Teves.
The prospect of a cut in interest rate by the US Federal Reserve was a key reason supporting renewed interest in gold. There was also uncertainty about proposed tariffs on gold to the US, and whether gold bars are exempt.
Lingering nervousness is likely being reflected in gold ETFs remaining elevated, said the bank. According to a report by BMO Capital Markets, investment last week totalled $3.9bn – the largest weekly inflows since US President Donald Trump’s ‘Liberation Day’ in April.
Compounding matters is the growing concern over the Federal Reserve’s independence and credibility amid political pressures alongside ongoing debates around the appropriate pace and scale of monetary easing.
This was after Trump put pressure on Federal Reserve chair Jay Powell and then moved to sack bank governor Lisa Cook. StoneX analyst Rhona O’Connell said this “aggressive mood music” was “adding fuel to the fire” supporting gold.
“Any sign of policy missteps or wavering autonomy is likely to be a bullish catalyst for gold, reinforcing its role as a hedge against systemic risk and loss of confidence in fiat currencies,” added Teves.
“Everything’s coming together to provide the perfect situation for higher gold,” David Wilson, director of commodities strategy at BNP Paribas told the Financial Times today. “Growing levels of economic uncertainty is quite clearly making gold more appealing.”
“Lower borrowing costs at the risk of fanning inflation is really perking up investor interest at the moment,” said Daniel Hynes, senior commodity strategist at ANZ. “It will underpin that upward momentum.”
Said Teves: “Gold’s long-term prospects remain robust, supported by higher production costs, limited supply, a broadening investor base and growing concerns about fiscal policies and debt sustainability.
“For investors seeking one of the cleanest ways to hedge against uncertainty, gold remains an attractive option to diversify portfolio in an unpredictable world.”
