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Gold Has Potential To Hit $1,400 By Next Year – Macquarie

Kitco News

(Kitco News) - While gold has fallen sharply from last month’s one-year high, one firm is not ready to give up the fight as they see prices eventually pushing to $1,400 an ounce by 2018.

In its latest commodity outlook published Tuesday, analysts at Macquarie said that they see gold prices push higher on the back of a faltering U.S. economy and weaker U.S. dollar. The Australia-based bank sees gold and silver as outperformers in the next 12 to 24 months.

The analysts admitted that there are still some short-term risks for the gold market; however, they added that they are not expecting to see price action similar to last year, where prices fell through to the end of the year as a result of rising interest rate hikes expectations.

They noted that higher interest rates will have less impact on gold going forward.

“Yes, the Fed will have to raise rates – growth remains higher than trend – but this is becoming true elsewhere. Crucially we think the dollar is more likely to weaken than strengthen with pre-2014 levels are perfectly achievable,” the analysts said. “We remain skeptical the U.S. Administration can restore U.S. economic outperformance, implying the trend for the dollar is still downwards.”

Macquarie said that along with a weaker U.S. dollar, ongoing political risks is, providing a rising floor for the precious metal.

The bank also sees more potential in the silver market, despite acknowledging some disappointment in the price action this year.

“Silver is a hybrid precious/industrial metal, and the industrial side seems well set, with growing global demand. The problems seems to be retail investors, who have shied away from silver, perhaps reflective of the rising economic confidence of its US base and the continuing weak inflation prints. We remain bullish, however,” the analysts said. “

However, although Macquarie is bullish on gold and sees the potential for another $100 rally, analysts added that the market might not have enough momentum to push much above $1,400 an ounce.

“Aside from the lifting threat of global financial crisis, the fact is, as we noted last year, the fundamentals just aren’t as good as they were,” the analysts said.

The comments come as December gold futures rose to a one-week high to within striking distance of $1,300 an ounce. December Silver futures have also pushed to a one-week high, last trading at $17.175 an ounce, up more than 1% on the day.

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