Make Kitco Your Homepage

Falling Real Rates, Recession Fears Should Push Gold Prices Beyond $1,300 -- Aberdeen

Kitco News

(Kitco News) - Gold prices continue to struggle to hold gains above the psychologically important $1,300-an-ounce level, but one market analyst remains optimistic that is only a matter of time before prices push materially higher.

In a recent research report, Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, said that low real rates should continue to support gold prices through 2019.

Real U.S. 10-year interest rates are currently trading at 54 basis points, down sharply from around 1% at the start of the year.

“This drop is the largest since the first half of 2016, which proved a strong catalyst for gold prices,” Gold said.

Gold also said that growing concern about an economic slowdown is another factor supporting the yellow metal. Earlier this week, the International Monetary Fund cut its global growth forecast to 2.3%, down from its previous estimate of 2.5%.

“It may only be a matter of time as concerns about rising levels of negative-yielding debt, an inverted yield curve, and the risk of a recession grow,” the strategist said. “Gold’s role as a potential risk hedge could grow if the market experiences a bout of volatility in response to these concerns.”

For 2019, the investment firm says its base-case scenario is for gold prices to trade in a range between $1,275 and $1,325 an ounce. However, in previous interviews, Gold has said that there is a growing probability that the firm’s bullish scenario plays out with prices pushing trading between $1,375 and $1,425 within the next 12 months.

Currently the gold market is seeing some strong technical selling pressure after prices push to nearly a two-week high. June gold futures last traded at $1,298 an ounce, down 1.2% on the day.

Along with gold prices, Gold said that he also remains positive on silver.

“Silver is often caught in the shadow of gold in the headlines, but investors interested in gold may do well not to overlook its current attractiveness,” he said. “Overall, silver remains cheap relative to gold with an improved speculative sentiment among futures positioning in 2019. Given its 0.8 correlation to gold, silver may still surprise to the upside driven by a positive gold outlook.”

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.