Gold, Silver Have Room To Rally Another 4% By Year End - ABN AMRO
(Kitco News) - Gold prices struggled Wednesday as the U.S. dollar continues to rally following positive U.S. labor data; however, one firm said in a report that it could be only a matter of time before the yellow metal pushes through resistance at $1,264 an ounce.
In her report Wednesday, Georgette Boele, coordinator of FX and precious metals strategy at ABN AMRO, said that while she is not expecting to see a massive rally in gold, prices have enough momentum to push higher. Her comments come as June Comex gold futures settled Wednesday’s session at $1,248.50 an ounce, down 0.78% on the day.
“Over recent weeks gold prices have approached the 200-day moving average which comes in just below USD 1,260 per ounce. The momentum is growing and therefore it is likely that prices will break through this level in the near-term. As a result, gold prices could quickly move up towards USD 1,275 per ounce. However, we don’t expect an aggressive rally in prices but a modest rise for the remainder of the year,” she said.
Boele reiterated her firm’s forecast for gold to end 2017 around $1,300 an ounce, and $1,400 an ounce by the end of 2018. She said that gold’s rally this year will be kept in check because of modestly higher U.S. bond yields and resilient strength in the U.S. dollar. At current prices, the rally to $1,300 represents another 4% move by the end of the year.
“It is very unlikely for gold prices to rally in an environment of a modest rise in the US dollar. Therefore, the upside in gold prices in the coming quarters is limited in our view. Moreover, we expect slightly more hikes in the Fed funds target rate than what markets have priced in. This should weigh on gold prices as well,” she said.
Following the bank’s modest bullish outlook for gold, it has also upgraded its forecast for silver. The bank sees silver prices ending the year at $19 an ounce this year, rising to $21 by the end of 2018. According to the bank, silver has potential to move another 4% by the end of the year, as May Comex futures last traded at $18.187 an ounce.
“It is likely that the positive momentum in gold prices will spill over to silver prices as well. In addition, our view that the US dollar rally has ended and will turn into dollar weakness next year will also be a major positive for silver prices. Moreover, further upward momentum in the US economy will probably result in higher industrial demand for silver,” she said.
However, Boele noted that there is a near-term risk to the silver market as bullish speculative positioning is above historical norms.
“This positioning poses a risk to the price outlook. In short, the upward momentum may be strong but investor positioning is too large to warrant a strong rally in the coming months,” she said.