BMO Looks For Gold Price To Remain Above $1,300/Oz
(Kitco News) - BMO Capital Markets looks forgold demand to continue even if the U.S. dollar recovers from some of itsrecent weakness, expressing confidence that the metal can remain above $1,300an ounce even on a pullback.
Spot gold Thursday traded as highas $1,366.05, its strongest level since August 2016, before backing down. Themetal has been boosted in recent days by weakness in the U.S. dollar in thewake of comments Wednesday by U.S. Treasury Secretary Steven Mnuchin sayingthat a softer dollar would be “good” for the U.S. This is a turnabout fromother administrations, which have favored a strong-dollar policy during thelast quarter of a century.
“Gold has outperformed ourexpectations since the mid-December Fed rate increase,” BMO said in a researchnote Thursday. “Gold is currently benefiting from a combination of geopoliticaland economic tailwinds, most recently comments from Treasury Secretary Mnuchinsupporting a weaker USD.”
Meanwhile, equities ofgold-mining companies - which have underperformed the metal itself -- are nowtrading at early 2016 levels, which BMO said is “a clear buy signal that isstarting to be noticed.”
Analysts said they doubt thedollar’s decline will be an ongoing trend, especially as other central banksadjust to recent moves.
“However, it is difficult to seea reason why investment demand for gold, which has also been strong YTD [yearto date], should turn negative given the positive flows towards commodities asan asset class and rising trade friction potential,” BMO said.
Analysts pointed out that knownexchange-traded-fund ETF holdings of gold are up 1.4% so far this year,totaling 72.5 million ounces. Inflows have been relatively steady.
“This gives us a degree ofconfidence that a gold price range above $1,300/oz can be sustained for now,”BMO said.
By Allen SykoraFor Kitco News
Follow @AllenSykora
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