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Gold Prices To Rally To $1,400 In 2019, U.S. Dollar To Drop - ABN Amro

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Gold Prices To Rally To $1,400 In 2019, U.S. Dollar To Drop - ABN Amro

(Kitco News) - Gold will fall to $1,250 an ounce by the end of the year on stronger U.S. dollar, but the move will be a temporary one, as the precious metal is due for a rally in 2019, said one analyst at ABN Amro.

“I’ve been negative on gold for some time, so the drop below $1,300 was not surprising. Gold should go down to around $1,250 at the end of the year,” ABN Amro senior precious metals and diamond analyst Georgette Boele told Kitco News in an interview on Monday. “The relationship between gold and dollar is a very negative one at the moment.”

Boele’s outlook, which is based on U.S. dollar short-term strength, is not a very bearish one either. “Very bearish would be below $1,200,” Boele said. “$1,250 is relatively close, it’s just a few percent away from where we are now.”

Boele views dollar’s recent rally as only a positive wave amid a longer-term dollar downtrend. “I still expect some upside in the coming months for the dollar — not massive, but a few percent. That is one of the main reasons why gold prices still have further to fall.”

The analyst also expects 10-year U.S. treasury yield to rise to 3.20% as well. “The combination of strong dollar with higher treasury yields is usually a very negative one for gold.”

The strengthening of the U.S. dollar has a lot to do with the U.S. treasury yields, the analyst pointed out.

“For quite some time, we had a situation that the dollar was not prospering from higher yields because of the political situation, which was weighing more heavily on the dollar. All the uncertainty on the geopolitical, and political side, as well as trade politics had a bigger impact on the dollar,” Boele said. “Now that those risks winded down, the dollar was able to recover. Since April the yield spreads started to become the dominate dollar driver again.”

The move below $1,300 an ounce in gold also made sense from a technical perspective, as gold failed to break out of the $1,300-$1,350 range for all of 2018, Boele added.

“We could end up temporarily below $1,250, but that will be an opportunity to buy,” she said. “It is only a near-term weakness.”

Next year will be better for gold, according to Boele, who is projecting that prices will rise to $1,400 on a very negative outlook on the dollar.

“If you look to next year, fundamentals on the dollar will be weaker. We expect deterioration on the fiscal side. The Federal Reserve rate hikes will also be roughly priced in at the start of next year. The factors will probably only become less favorable [for the greenback].”

ABN Amro is looking for another three Fed rate hikes this year and two next year.

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.