Gold Won't Take A Beating Forever; Here's What It Takes To Reach $1,400
(Kitco News)- Gold has been held back by a stronger U.S. dollar but theyellow metal could get a boost if the Federal Reserve reigns in expected ratehikes, this according to Chris Mancini, research analyst at Gabelli Funds.
Gold prices have been on a steady decline ever since theJune 13 Fed meeting, with spot gold down nearly 5% since its June highs. TheU.S. dollar index, DXY, has rallied 1% in the same period.
“I think what ultimately drives gold higher will be the Fedpausing and then the market pausing in the Fed easing. And so if the Fed iseasing while the ECB [European Central Bank] is printing and the BoJ [Bank ofJapan] is printing then I think gold will do really well.” Mancini told KitcoNews.
The commodities analyst noted that while tailwinds may bepresent for gold, he expects the yellow metal to trade range-bound for theremainder of the year.
“I think that gold will be range-bound for the rest of theyear, between this $1,250 [an ounce] and $1,350 range,” he said.
Mancini said that for the short-term, speculators aredriving down gold prices as they buy U.S. dollar futures and short goldfutures.
“The stronger dollar has been due to this kind of trade warthat’s been going on between the U.S. and China and so it’s really been a haventrade,” he said.
President Donald Trump’s proposed tariffs on China and othertrading partners have met retaliatory measures. Canada is the latest country tocounter, slapping $16.6 billion worth of tariffs on U.S. goods.
Escalating tensions between the U.S. and other majoreconomies have prompted some analysts to speculate that a full-fledged tradewar may be on the horizon and this could prompt the Fed to slow its pace ofrate hikes.
Mancini added that the Fed will only likely ease up onhiking if macroeconomic conditions worsen.
“I think what gets gold to really move will be a view thatthe economy is going to slow and the Fed is going to halt its tightening cycle,”he said.
On silver, Mancini said that like gold, the white metal isin need of a pickup of investment demand, and will only likely rally once goldbreaks above $1,400 an ounce.
“The marginal demand from silver comes from investmentdemand primarily in the U.S., and so if the gold price picks up then I thinkthe silver price will pick up,” he said.
Mancini noted that at current prices, investors should lookinto gold as a buying opportunity, starting with the bullion.
“I think it’s an opportunity to buy physical gold here, andthen as gold moves higher, start to get into the gold stocks,” he said.
By David LinFor Kitco News
Follow @davidlinMTL
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