Gold's Grim Picture Makes The Metal More Attractive - Wells Fargo
(Kitco News) - Long-term precious metal investors should not miss out on the current “decent deal” in gold, said Wells Fargo Investment Institute while sticking to its $1,350 per ounce in twelve months call.
“With a $1,100 handle today, we see gold as favorable for long-term investors,” Wells Fargo Investment Strategy analyst Austin Pickle said. “Twelve-month gold target range remains $1,250 to $1,350 per ounce.”
The institute’s number one conviction is that the rallying U.S. dollar, which has been putting tremendous downward pressure on gold prices since April, will finally take a major step back towards the end of the year.
“Recent dollar strength likely will fade into year-end. This, in turn, should support gold prices—as gold tends to trade inversely to the dollar,” Pickle wrote.
On top of that, money managers have turned extremely bearish on gold, which has in the past “offered good entry points” for investors, added Pickle.
“The chart below illustrates this point. It shows ‘smart money’ gold bearishness (green line) and plots that against the price of gold (blue line). The only other time when money managers were even close to as gloomy on gold as they are today was when gold was at the recent bear-market low of $1,050 per ounce (see yellow highlight boxes),” the analyst said.
Making gold even more appealing are the U.S. stocks, which have climbed to all-time highs.
“This fact, coupled with gold’s recent decline, makes gold look fairly cheap by comparison. In our opinion, for long-term investors, accumulating gold today looks like a decent deal,” Wells Fargo concluded.
Spot gold on Kitco.com was flat and trading just below $1,200 an ounce when Asian markets opened on Tuesday, with prices last seen at $1,193.80, down 0.09% on the day.
Kitco’s senior technical analyst Jim Wyckoff said that upbeat investor attitudes “thwarted buying of the safe-haven metals” on Monday.
“Risk appetite among traders and investors is on the slight upswing to start the trading week, despite some lingering concerns about the trade war being waged between the U.S. and its major trading partners—namely China. The U.S. is set to levy still more tariffs on China’s imports to the U.S,” Wyckoff said in his PM Roundup. “Veteran market watchers know that the months of September and October can be very turbulent for the stock and financial markets.”