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ABN AMRO Sees Gold Prices End Year At $1,400 But Is Bullish Long-term

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(Kitco News) - Gold prices are holding near a six-year high above $1,500 but one bank sees signs that the current rally is unsustainable for the rest of the year.

In a report Monday, Georgette Boele, senior foreign exchange and precious metals strategist at ABN AMRO, reiterated her call for gold prices to end the year at $1,400 an ounce, while raising her 2020 year-end price target to $1,600 an ounce, up from the previous forecast of $1,500 an ounce.

“We think that gold prices have risen too sharply in a short period of time and we expect a correction in the coming months,” Boele said.

The comments come as gold holds support above $1,500 an ounce, up more than 18% since the start of the year. December gold futures last traded at $1,517.10 an ounce, up 0.57% on the day.

The Dutch analyst said that bullish speculative positioning, pushing to a two-year high and ETF investment demand -- which hit a six-year high last month, are at extreme levels.

“If the newsflow becomes less supportive, a profit-taking wave could push gold prices easily towards USD 1,400 per ounce again,” she said.

Boele added that expectations for looser monetary policy from both the Federal Reserve and the European Central Bank are largely priced in and will have less impact on gold going forward.

The CME’s FedWatch Tool shows that markets are expecting at least one rate cut at its next meeting with a 21% chance of a 50-basis point move.

Resilient strength in the U.S. dollar also poses a threat to gold, she said.

Although there are growing risks heading into the year-end, Boele said that the Dutch bank remains bullish on the yellow metal in the long-term. She explained that falling bond yields, which most European debt now trading in record negative territory, will make gold an attractive safe-haven investment.

Boele added that continued central bank demand will provide long-term support for gold.

“It is likely that central banks will continue to diversify some of their reserves into gold, as the percentage of gold is relatively small. This is a long-term process,” she said.

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