Higher Inflation Will Drive Gold Out Of Its Rut - ING
(Kitco News)- Gold’s inability to break throughcritical resistance is frustrating many investors, but one Dutch bank continuesto see potential for the yellow metal.
In a report Monday, OliverNugent, commodity strategist at ING, said that he thinks it’s only a matter oftime before gold prices push past $1,400 an ounce as markets are underpricingrising inflation risks.
While the Federal Reserve isexpected to continue raising interest rates this year, forecasting two morerate hikes, Nugent said that the central bank will remain behind the inflationcurve, which would keep real interest rates low, supporting gold prices.
“Our economists expect inflationprints to remain high and nudge closer to 3% into summer now that a distortionfrom cell phone data pricing drops out of annual comparisons, as well assupport from a weaker dollar,” he said. “Each positive data print will temptgold closer to its higher range.”
For Nugent, the key levelinvestors need to keep an eye on is $1,350 as this is proving to be the metal’sbiggest hurdle. He added that there are a lot of investors sitting on thesidelines waiting for prices to break out. June Comex gold futures last tradedat $1,345.60 an ounce, down 0.36% on the day.
“The market is increasinglyskewed to the upside but it will need to be nudged into taking outrightpositions through an initial breakout in prices,” he said.
Along with higher inflation, INGis also bullish on gold as analysts see market volatility rising because ofongoing geopolitical turmoil.
The Dutch bank is not justbullish on gold. Nugent said that he also sees potential for silver prices asthe gold/silver ratio is too high. Kitco.com shows the ratio currently tradingat 80.36 points. May silver futures last traded at $16.74 an ounce, up 0.38% onthe day.
While the market has an abundant,liquid above-ground supply, Nugent said that bearish positioning in silver isunstainable.
“This leaves the market extremely vulnerable toshort covering although time could be running out,” he said. “A sharpgold-silver ratio reversal will likely take gold’s initial uplift to squeezeout the silver shorts before the funds show further fatigue.”
By Neils ChristensenFor Kitco News
Follow neils_C
nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.