Gold Prices To Push Past $1,400 By 2019 - Murenbeeld & Co.
(Kitco News)- The gold market continues tostruggle to maintain momentum as its quiet summer period quickly approaches,but one research firm is expecting that prices will break out of their currenttrading channel by the end of the year and be solidly above $1,400 an ounce in2019.
Following a positive firstquarter for gold, the research team at Murenbeeld & Co. increased its priceforecast for the rest of the year. In an interview with Kitco News, ChantelleSchieven, head of research at the Murenbeeld, said that because of risinginflation pressures and a weaker U.S. dollar, the team now expects gold pricesto end the year at $1,386 an ounce and post an average for the year of around$1,355 an ounce. In 2019, the firm expects gold prices to average $1,421 anounce.
“Were we to add ageopolitical-crises factor, say a $10-30 ‘bump’ in the quarterly average, thengold is likely to be north of $1,400 by 2018-end,” the firm said in its updatedreport.
Falling momentum in the goldmarket has pushed prices the bottom end of its current trading range; however,prices still continue to hold important near-term support levels. As of 8:42a.m. EDT, Junegold futures last traded at $1,326.10 an ounce, down almost 1% on the day.
Going forward, Schieven said thatanalyst expects to see further weakness in the U.S. dollar as rising debtlevels threaten the U.S. economy. She added that a weaker greenback is one ofthe reasons why the gold market has been able to defy rising yield bond yields.
“Not only do you have increasedspending but there [are] also the major tax cuts that markets will have to dealwith,” she said. “Growing debt is not a positive environment for the U.S.dollar.”
Schieven’s comments come afterthe Congressional Budget Office released a report saying that the deficit willgrow by $1 trillion in 2020, two years faster than previously estimated. At thesame time, the CBO expects the deficit to grow by than $981 billion by 2019.
“The U.S. dollar is facing a biguphill battle,” added Schieven.
Not only will growing debtproblems weigh on the U.S. dollar, but Schieven said that it will also stop theFederal Reserve from raising rates aggressively this year. A low interest-rateenvironment coupled with higher inflation pressures will keep real interestrates low, which is positive for gold prices, added Schieven.
“The government won’t be able toservice its debt if interest rates continue to rise,” she said. “While the U.S.economy will continue to grow, we don’t think it will be high enough to offsetthe growing debt.”
Not only does the U.S. dollarface growing deficit concerns, Schieven said that the escalating threat of atrade war and other geopolitical issues will weigh on the U.S. currency.
Schieven said that ongoinggeopolitical uncertainty will keep gold prices elevated, even as specificevents will create fleeting volatility. Overall, she said that research showedthat geopolitical issues can boost prices by $10 or $20.
Although gold prices will remainin an uptrend through the rest of the year, Schieven said that furthergeopolitical uncertainty, added to volatility and selling in equity markets,could push gold prices through the $1,400 level a lot sooner than analysts areexpecting.
By Neils ChristensenFor Kitco News
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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.