'No Place Like Gold': Investors Still Sprinting Towards Safety - Analysts
(Kitco News) - The gold market could be looking at $1,550 an ounce sooner than expected as investors rush into safety no matter the cost, according to analysts.
The outlook on gold still remains bullish as the metal has pushed back above the $1,500 an ounce. Strong momentum in prices is keeping traders focused on safe-haven assets as protection against growing uncertainty around the globe.
Gold was very volatile on Tuesday, first touching $1,545 an ounce and then sharply falling below $1,500 on news that the U.S. was planning to delay China tariffs until December 15 on items such as clothing and cellphones.
The U.S. also said it will remove some products from the list due to “health, safety, national security, and other factors,” according to the United States Trade Representative (USTR) office.
Just minutes later, however, gold managed to recover back above $1,500 an ounce with December Comex gold last trading at $1,513.30, down 0.26% on the day.
“The marketplace was reading this news as a positive step, including maybe the U.S. ‘blinking.’ However, upon further reflection, the marketplace is now deeming this as a positive for the negotiations, but probably not a ‘break-through’ on the matter,” said Kitco’s senior technical analyst Jim Wyckoff. “That allowed gold and silver prices to move up from their daily lows.”
It might take more for gold bulls to give back their control. Earlier on Tuesday, “there was no place like Gold,” said FXTM senior research analyst Lukman Otunuga.
“The precious metal has entered today’s session in an incredibly bullish fashion with prices charging to a fresh 6-year high above $1,525 amid rising risk aversion,” Otunuga wrote.
Gold’s significant drivers remained in place — geopolitics, U.S.-China trade tensions, and increased market uncertainty, he added. “With geopolitical risks and concerns over slowing global growth set to make gold shine with glaring intensity this week, the outlook remains firmly bullish.”
The $1,550 level could be here sooner than expected: “A solid breakout and daily close above the $1,525 level is likely to inject gold bulls with enough inspiration to challenge $1,550,” the analyst wrote.
Tensions around the world are heating up and it is keeping gold prices supported, RJO Futures senior market strategist Phillip Streible told Kitco News on Tuesday.
“The growing tensions between China and Hong Kong, India and Pakistan, and the collapse of the Argentine peso. These seem to be newer developments that are gathering traction,” Streible said. “My year-end target is $1,600 even though that target may be achieved a lot sooner based on these developments.”
Streible is not ruling out gold back at $1,900 an ounce if there is a risk event like the Lehman Brothers collapse.
“We are setting up for a possible crash-type scenario in U.S. equity markets with expectations of three more interest rate cuts. Gold hit $1,900 before on the fall of the Lehman Brothers. We could see some major banks around the globe going into a liquidity crisis and ultimately crashing. The Deutsche Bank is one that comes to mind that is under significant amounts of pressure,” Streible said.
Investors seem ready to pay “top-dollar” for safety amid global uncertainty, noted TD Securities.
“Facing a wall of worries, global capital is chasing safety and has been willing to pay top-dollar in order to acquire it,” TD Securities strategists wrote on Tuesday. “The ongoing fears of capital outflows from Hong Kong [are] spurring continued appetite for safe-haven assets, which are in short supply.”