2018 Might Be The Perfect Time To Buy Gold - Commonwealth Bank
(Kitco News) - Next year is looking like a perfect time to get into the gold market, says one commodity strategist, who forecasts lower prices by the end of 2018.
“Gold still has some room to give before it is a good buy. Right now, we are in a neutral position. But, I’d be more comfortable buying when we get down to at least $1,250 or below. And anything around $1,300 is a good selling level,” Vivek Dhar, commodity strategist at the Commonwealth Bank of Australia (CBA), told Kitco News on Friday.
And this $1,250 level might be just around the corner, Dhar said, adding that CBA sees gold averaging $1,300 an ounce during the last quarter of this year and then coming down to $1,250 by the end of 2018.
“The range of $1,250-$1,300 is looking to continue for the foreseeable future,” he said in a telephone interview.
Some of the things to watch for as we get ready to say goodbye to 2017 is how the nomination of Federal Reserve Governor Jerome Powell as the next head of the U.S. central bank might impact gold.
“We believe Powell is a centrist on the FOMC and is expected to maintain the Fed’s current gradual approach to interest rate normalization,” Dhar said.
Another key trigger for gold will be the outcome of Trump’s tax reform. “If that reform comes through, it will be positive for the U.S. dollar, with all the cash repatriation that would go along with that,” Dhar explained. “And assertive U.S. dollar is negative for gold.”
Other surprises in 2018 could come from geopolitical tensions, which have retreated into the background for now.
“We saw gold prices go up above $1,300 after U.S. President Donald Trump and North Korea exchanged words. Those are the risks the market can’t forecast,” Dhar said.
Geopolitical risks can work around the standard gold drivers, such as U.S. real interest rates, to boost safe-haven demand, but their effects are usually only temporary, commodity strategist added.
“Risk of escalation with North Korea has moderated now or the market had simply adjusted to it,” he said. “The general trend is when we have a risk event, it gets priced in and then stops. This was the case with North Korea, which first heavily influenced prices, but as that conversation kept going, the market looked away from it.”