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Gold's Selloff Isn't Over Yet, Prices Could Drop To $1,200 - ABN Amro

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(Kitco News) - Although gold prices have managed to bounce off fresh 12-month lows, the market is still down almost 7.5% from its April highs and one international bank sees risks for more down side.

In a report Tuesday, Georgette Boele, coordinator of foreign exchange and precious metals strategy at ABN Amro, said that gold prices could continue to fall and the market is weighed down in part by surging momentum in the U.S. dollar. She said that there is a risk that prices fall to $1,200 an ounce. For silver, she said that prices could fall to $15.60 an ounce in the near-term.

“Higher U.S. dollar, looming trade war between the U.S. and China, downward adjustment in eurozone outlook and the slide in the Chinese yuan have contributed to price weakness. Weakness in precious metal prices is not over yet, but prices are close to the bottom,” she said in her report. “In the near-term, weakness in precious metal prices may not be over yet. For a start, we expect the U.S. dollar to rally a bit further on strong economic data and ongoing Fed rate hikes. We also expect 10y US Treasury yields to rise a bit further.”

However, she added that $1,200 an ounce would represent a market bottom.

“We see these levels as an opportunity to position for higher gold and silver prices next year,” Boele said. “Later in the year, we expect the U.S. dollar and 10y US Treasury yields to peak. This should support precious metal prices. We also expect U.S. growth to peak in the fourth quarter of this year.”

For the current year, the bank sees gold prices holding relatively steady ending the year around $1,250 an ounce with silver prices closing 2018 at $16 an ounce.

Looking ahead, ABN Amro, has maintained its long-term forecast and sees gold prices rising to $1,400 an ounce by December 2019, while the Dutch bank also sees silver prices rise to $20 an ounce.

The comment comes as August gold futures settled Tuesday at $1,253.50 an ounce, up almost 1% on the day. Technical buying and bargain hunting helped push the yellow metal off a fresh 12-month low.

At the same time, September silver futures settled the day at $16.043 an ounce, up more than 1% on the day.

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.
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