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Gold Prices To Push Past $1,400 By 2019 - Murenbeeld & Co.

Kitco News

(Kitco News) - The gold market continues to struggle to maintain momentum as its quiet summer period quickly approaches, but one research firm is expecting that prices will break out of their current trading channel by the end of the year and be solidly above $1,400 an ounce in 2019.

Following a positive first quarter for gold, the research team at Murenbeeld & Co. increased its price forecast for the rest of the year. In an interview with Kitco News, Chantelle Schieven, head of research at the Murenbeeld, said that because of rising inflation pressures and a weaker U.S. dollar, the team now expects gold prices to end the year at $1,386 an ounce and post an average for the year of around $1,355 an ounce. In 2019, the firm expects gold prices to average $1,421 an ounce.

“Were we to add a geopolitical-crises factor, say a $10-30 ‘bump’ in the quarterly average, then gold is likely to be north of $1,400 by 2018-end,” the firm said in its updated report.

Falling momentum in the gold market has pushed prices the bottom end of its current trading range; however, prices still continue to hold important near-term support levels. As of 8:42 a.m. EDT, June gold futures last traded at $1,326.10 an ounce, down  almost 1% on the day.

Going forward, Schieven said that analyst expects to see further weakness in the U.S. dollar as rising debt levels threaten the U.S. economy. She added that a weaker greenback is one of the reasons why the gold market has been able to defy rising yield bond yields.

“Not only do you have increased spending but there [are] also the major tax cuts that markets will have to deal with,” she said. “Growing debt is not a positive environment for the U.S. dollar.”

Schieven’s comments come after the Congressional Budget Office released a report saying that the deficit will grow by $1 trillion in 2020, two years faster than previously estimated. At the same time, the CBO expects the deficit to grow by than $981 billion by 2019.

“The U.S. dollar is facing a big uphill battle,” added Schieven.

Not only will growing debt problems weigh on the U.S. dollar, but Schieven said that it will also stop the Federal Reserve from raising rates aggressively this year. A low interest-rate environment coupled with higher inflation pressures will keep real interest rates low, which is positive for gold prices, added Schieven.

“The government won’t be able to service its debt if interest rates continue to rise,” she said. “While the U.S. economy will continue to grow, we don’t think it will be high enough to offset the growing debt.”

Not only does the U.S. dollar face growing deficit concerns, Schieven said that the escalating threat of a trade war and other geopolitical issues will weigh on the U.S. currency.

Schieven said that ongoing geopolitical uncertainty will keep gold prices elevated, even as specific events will create fleeting volatility. Overall, she said that research showed that geopolitical issues can boost prices by $10 or $20.

Although gold prices will remain in an uptrend through the rest of the year, Schieven said that further geopolitical uncertainty, added to volatility and selling in equity markets, could push gold prices through the $1,400 level a lot sooner than analysts are expecting.

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