Standard: Gold Pullbacks To $1,250 Would Be 'Good Entry Levels'
(Kitco News) -Standard Chartered Bank figuresany pullbacks in gold prices to $1,250 an ounce would be buying opportunities.
So far Thursday, the metal ishigher, rallying since Wednesday’s release of minutes of the May Federal OpenMarket Committee meeting did not seem to suggest policymakers would beaccelerating their pace of monetary tightening. The market received an added boostin safe-haven buying after a summit between the leaders of the U.S. and NorthKorea was canceled. As of 10 a.m. EDT, spot gold was $11.25 higher to $1,304.45an ounce.
But should gold reverse course,“we view price dips towards $1,250/oz as good entry levels for fresh long goldpositions,” Standard said.
The report, written byprecious-metals analyst Suki Cooper, said the second quarter is likely to bethe weakest of the year for gold. Gold broke below $1,300 an ounce last weekand hit a fresh 2018 low at the start of this week. However, Standard expectsprices to average $1,375 in the fourth quarter as the U.S. dollar renews aweakening trend and the potential for inflation expectations rises.
Cooper explained that the marketdipped below the $1,250 level ahead of an FOMC meeting back in December. Thiswas the last level at which the physical market responded rapidly to a pricedecline, she pointed out, as buyers in the key nations of China and India“viewed the price dip as a good buying opportunity.”
Gold’s key driver remains theU.S. dollar, as the three-month rolling correlation continues to hover above70%, Standard said. Next are 10-year Treasury yields, with the three-monthcorrelation strengthening above 50%.
Standard’s foreign-exchangestrategists expect renewed U.S. dollar weakness due to a rebound in globaleconomic growth following a temporary slowdown in the first quarter, as well asongoing U.S.-driven trade risks that could encourage flows into non-US assets,Standard said.
“Geopolitical uncertaintysurrounding the Middle East, trade protectionism and sanctions continue tolimit the downside risk for gold prices, rather than providing a catalyst topush prices higher,” Cooper wrote.
She describedexchange-traded-product gold flows as relatively stable and “sticky” asinvestors take a longer-term view and turn to gold as a hedge againstgeopolitical uncertainty. ETP inflows have reached 98 tonnes and are on trackto exceed last year’s annual inflow of 231 tonnes.
Meanwhile, Standard reported thatbuyers in Turkey have been snapping up gold despite all-time highs in localcurrency terms. Turkey’s gold imports reached a record 361 tonnes last year andare up 45% year-on-year so far in 2018.
“Local consumers have turned togold as a store of value amid rising inflation, heightened political andeconomic tensions, and currency weakness,” Standard said. Further, Turkey’scentral bank has been adding to its gold reserves since May 2017, including85.9 tonnes last year and another 29.9 tonnes so far in 2018.
“Turkey’s demand has buckedweakness in other regions, and the current conditions suggest gold demand willremain strong,” Standard said.
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.