Societe Generale 'Cautiously Bullish' On Gold Prices
(Kitco News)- SocieteGenerale is “cautiously bullish” on gold prices, looking for the metal toaverage $1,250 an ounce in the fourth quarter and $1,275 in the first quarterand for all of 2019.
Thebank released an updated forecast Thursday ahead of next week’s gathering ofthe London Bullion Market Association. The bank said its outlook has notchanged materially since the one issued a month ago.
Asof mid-afternoon on Thursday, spot gold was $5.10 softer to $1,228.10 an ounce.
Goldhas been back above $1,200 an ounce for the last two weeks, helped bysafe-haven buying due to weakness in global equities and geopolitical tensions,said the report, written by metals analyst Robin Bhar.
“Gold’simpressive performance of late, coming amid USD [U.S. dollar] strength,suggests that gold finally is behaving like a safe-haven asset,” the reportsaid.
Therally came amid inflows into gold-backed exchange-traded funds, Bhar pointedout. Furthermore, he continued, there has been a pickup in gold purchases bycentral banks, including Hungary, Poland, India, Turkey and Mongolia, inaddition to regular gold buyers Russia and Kazakhstan.
“Weare cautiously bullish on gold prices on the premise that current prices areoversold and reflect a significant short position in the speculative market,which we see as transitory,” the report said.
Moneymanagers still hold a large net bearish position in gold futures, even thoughit is not as big as two weeks ago. Still, this provides fuel for a rallywhenever these accounts buy to cover, or offset, their positions. The disaggregated report from the Commodity FuturesTrading Commission showed that money managers stood net short by 49,382 futurescontracts for the week ending Oct. 16, although this was down from 109,454 theprior week.
Thefourth quarter tends to be strong seasonally due to gold demand out of Indiaand China, said the bank. Further, SocGen foreign-exchange strategists seerecent U.S. dollar strength easing going into 2019, the report said.
Thedirection and volatility of equities will be keys in whether gold can extendits rally, the report said.
“Pricedips are likely to be well supported [as] longer-term investors continue to beattracted to gold as a means of diversification and to hedge against risinguncertainty across other asset classes,” the report continued.
Still,the report listed factors that could limit the upside.
“Onthe physical market, however, we expect supply to grow sequentially in both2018 and 2019, adding 210 [tonnes] of new supply against a decrease of 82t infabrication demand (jewelry, coins and industrial applications),” SocieteGenerale said. “As a result, the physical balance should continue to weigh onprices.
“Rate-hikeincreases and tightening liquidity in the U.S. will likely weigh on investorappetite as both the cost of carry and the opportunity cost of gold increases.”
By Allen SykoraFor Kitco News
Follow @AllenSykora
asykora@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.  |