(Kitco News) The valuable metals sector is prone to outperform different commodities for the second yr in a row in 2020, in keeping with the Australia and New Zealand Banking Group (ANZ), which is projecting for gold to rise above $1,600 subsequent yr.
“Treasured metals look effectively positioned to outperform different sectors for the second consecutive yr in 2020,” ANZ senior commodity strategist Daniel Hynes and commodity strategist Soni Kumari stated within the financial institution’s 2020 outlook.
ANZ sees gold rising steadily all through subsequent yr and peaking at $1,620 in December.
“Our gold mannequin factors to USD1,600/ozin 2020. Our mannequin – based mostly on actual rates of interest, USD and inflation expectations – exhibits gold’s worth at USD1,470/oz. With a barely weaker USD and solely a tepid enhance in bond yields, it forecasts gold will hit USD1,600/ozin 2020,” the strategists wrote.
International themes of de-dollarization and geopolitical uncertainty are just a few of the primary drivers that may preserve gold costs supported, ANZ’s outlook acknowledged.
“Though the uncertainties associated to US-China commerce and Brexit peaked in 2019, we imagine geopolitical and macroeconomic dangers will stay elevated subsequent yr,” Hynes and Kumari stated. “The continuing theme of de-dollarization ought to see investor urge for food for gold stay robust.”
The U.S. presidential election shall be one of many dangers to maintain an in depth eye on because it straight impacts the monetary markets. “With a number of potential outcomes, we see room for market volatility. This could set the stage for safe-haven property to carry out via 2020,” the strategists defined.
Additionally, the rise of populism world wide will increase the case for holding gold in your portfolio, the outlook added. “The geopolitical pattern towards division and populism will preserve producing uncertainty, enhancing the safe-haven enchantment of the sector.”
Decrease rates of interest environmental on a worldwide scale additionally works in favor of the yellow steel subsequent yr. “A pause in Fed rate of interest hikes shouldn’t diminish investor urge for food … [as] steady-to-higher inflation preserve[s] rate of interest decrease in 2020,” the strategists stated.
One other a part of the equation that results in gold breaching the $1,600 an oz degree in 2020 is the weaker U.S. greenback, added ANZ.
“USD appreciation is prone to abate, with draw back dangers rising via 2020 … With a extra steady coverage setting, the USD is prone to stabilize and commerce in a decent vary. We count on the EUR to outperform the USD,” Hynes and Kumari wrote.
Asian gold demand will must be carefully watched as effectively after Indian gold imports fell 53% between July and October of this yr amid record-high native costs.
“In 2020, increased funding demand shall be required to clear the availability overhang left by weaker gold jewellery demand and leveling-off central financial institution purchases,” the strategists stated.
One of many main dangers to increased gold costs stays crowded investor positions, which may set off a sell-off in 2020. “Elevated speculative positions go away threat of a value set-back,” the outlook highlighted.
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