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Safe-Have Demand To Drive Gold Prices In 2018 - Citigroup

Kitco News

(Kitco News) - An environment of elevated geopolitical risk will keep a bid under gold prices as one bank sees prices pushing through $1,400 an ounce in the next three years.

In a recent report, analysts at Citigroup said that they are bullish on gold as it sees safe-haven demand pushing prices above $1,400 an ounce “for sustained periods through 2020.”

"Event-driven bids for gold seem to be occurring more frequently and may be the new normal,” the analysts said. In short, even as the rates and forex channel dominate the outlook for gold pricing, the yellow metal is increasingly being used by investors as a policy and tail risk hedge.”

The American bank noted that gold prices are on track to hit $1,270 per ounce by the end of 2018 and then climb to around $1,350 per ounce and $1,370 per ounce in 2018 and 2019.

Potential economic crisis, elections, military action are some of the key global events that could prompt gold’s safe-have allure among investors, the bank said.

Some analysts have noted that gold has been unable to hold safe-haven gains, as prices are well below key levels seen during events like the Brexit vote in June last year and the U.S. election in November. However, while Citi analysts admit that there is not a consistent pattern for gold price performance during times of global upheaval, prices have rallied more frequently during these periods.

At the start of the week, analyst said that gold did not see much safe-haven demand because investors shrug off growing political instability in Germany as Chancellor Angela Merkel was unable to form a coalition government. Merkel said that she favors a new election rather than forming a minority government.

Despite the uncertainty, gold was unable to push above $1,300 as it was hit with a wave of selling pressure.

Gold prices have slowly recovered from Monday’s drubbing but remain well entrenched within a trading range between 100-day and 200-day moving averages.

December gold futures last traded at $1,280.10 an ounce, up 0.38% on the day.

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