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Gold has room to hit $2,000 as equities stumble – Citigroup

Kitco News

(Kitco News) - Global uncertainty continues to drive safe-haven demand, supporting gold prices and driving it to fresh six-year highs and one Citigroup analyst says the yellow metal still has room to move higher.

In a recent research note,  Shyam Devani, senior technical strategist at Citigroup, said that the ratio between gold and the S&P 500 is testing a critical pivot point and a break higher could trigger a rally that pushes gold prices 25% higher. Devani’s estimate would push gold prices to nearly $2,000 an ounce.

“Equity markets continue to look vulnerable, especially given the deeper inversion of the U.S. yield curve,” the Citigroup analyst said. “Sometimes the ratio between asset classes is too hot. Sometimes too cold. But sometimes the chart signals ‘Just right’.”

The gold market saw some technical selling pressure Wednesday after starting the day at the highest level in six years. December gold futures last traded at $1,548.60 an ounce down 0.21% on the day.

However, August has been a significant month for the yellow metal with prices up $112 an ounce, beating June for the best gains since 2016. The gains come as the S&P 500 is down more than 3% this month.

Many analysts remain bullish on gold as global recession fears continue to grow.

Wednesday saw the 10-year bond yield fall even further below the interest rates on two-year bonds. At the same time interest on 30-year bonds fell below 2%. The inversion of the yield curve has been a consistent predictor ahead of every major recession.

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