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Bulls Call For $1,400 Gold As Metal Gains Strength

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Bulls Call For $1,400 Gold As Metal Gains Strength

(Kitco News) - Gold’s pullback on Monday isn’t fazing one Russian-based investment banker, who is calling for a $1,400 price tag by year end.

The market could see gold jump to $1,360 in the next three months and then climb even higher, Evgeny Ananiev, head of precious metals at VTB Capital JSC, recently told Bloomberg.

Gold’s main drivers for the rest of the year will be geopolitical tensions, including the threats issued by the U.S. and North Korea, as well as growing demand from China and India, Ananiev explained.

“We may see some correction, but I don’t think gold will drop below $1,200 as it’s well supported,” he said in an interview in Goa during the weekend.

On Monday, the yellow metal saw some profit taking, after reaching a nine-week high on Friday. December Comex gold was last seen trading at $1,290.40, down 0.28% on the day.

Friday’s surge was triggered by heightened U.S.-North Korea tensions, as U.S. President Donald Trump issued a new threat, stating that the American military options were “locked and loaded” when it comes to Pyongyang.

Also, the market digested disappointing inflation news out of the U.S. on Friday, with the Consumer Price Index rising just 0.1% in July, while consensus forecasts called for an uptick of 0.2%. In response, gold soared to $1,297 an ounce but succumbed to profit taking shortly after.

Other analysts, who attended the 14th edition of India International Gold Convention 2017 conference in Goa, were also very hopeful in their gold outlooks.

“Fundamentally, we have been very bullish on the market,” said Chirag Sheth, an analyst at London-based Metals Focus Ltd. “What North Korea has done is given gold the legs to go above the $1,300 level and sustain above that level.”

Sheth also projects for gold prices to hit $1,400 level in the next six to nine months, adding that the U.S. Federal Reserve will be reverting to a more dovish stance when it comes to interest rate hikes this year.

Chinese and Indian gold demand, the world’s top two consumers of the precious metal, are also key to keep an eye on when making a price forecast, according to the analysts.

For example, China bought 230 metric tons of Australian gold last year, which exceeded $11 billion on the Shanghai Gold Exchange, according to recent data released by The Perth Mint. The growth in demand is undeniable, noted analysts, with Australian gold exports to China more than doubling from 2011 to last year, surging from 110 metric tons to 232 metric tons.

Overall, Chinese gold consumption was up nearly 10% to 545.2 tons during the first six months of the year, according to the China Gold Association.

Indian gold demand is also recovering this year, following a drop in 2016. The World Gold Council (WGC) estimates a revival back to 800-900 tonnes a year. 

“The demand will come back, but it could take one or two years before it is back up to 800-900 tonnes a year,” managing director at World Gold Council India, Somasundaram PR, told Kitco News in a July interview.

Another interesting fact about India is that 250 million people are currently living below the savings threshold in India. They will enter the middle class and become savers in the next five years, according to Somasundaram. “One gram of gold per person translates into 250 tonnes,” he said.

Currently, total gold holdings in India equal to about 23,000-24,000 tonnes, which translates to about one trillion dollars.

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.