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Pepperstone Group Maintains $1,522 Gold Price Call

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(Kitco News) - Gold is a “juggernaut” and is proving to a be a good hedge against negative real bond yields, with the yellow metal’s prices holding above $1,500 the medium-term, this according to Chris Weston, head of research of Pepperstone Group.

“You’ve got 10-year real yields looking like they might turn negative at any stage. 5-year real yields are heading that way. We’ve got a situation where the pool of negative debt is well over $15 trillion at the moment and gold’s been working as a hedge against that ballooning pool of negative debt,” Weston said. “The fact that gold has no yield is yield in itself, in this sort of paradox situation.”

On key levels to target, Weston said that gold is likely to test 2011 lows of $1,522 an ounce.

“We’ve been saying that the 2011 lows of around $1,522 would probably be a realistic target. We’re not a million miles away from that at the moment,” he said.

Weston noted that $1,587 to $1,600 an ounce could be a realistic longer-term target.

Shorter-term, Weston said gold has likely hit a support level already.

“We don’t see too much of a move lower. There is a lot of love in gold at the moment,” he said.

Risks for gold may come in the form of a selloff in bond yields, Weston added.

Gold prices have surged and is seeing its best weekly gains in more than three years. Market uncertainty intensified at the start of the week after the Chinese government let the yuan rise above 7 against the U.S. dollar for the first time in more than a decade, igniting fears that the U.S. –China trade war has evolved into a currency war.

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