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Gold's summer rally is just the start - UBS

Kitco News

(Kitco News) - Gold rally in June that has driven prices nearly $200 higher could be just the start as other investment sectors, largely absent during the summer, finally jump into the market, according to one market strategist.

In a report Tuesday, Joni Teves, precious metals strategist at UBS, said that she is upgrading her gold forecast as she sees prices pushing through $1,600 an ounce in the next 12 months. She added that she expects gold prices to push to $1,600 by the end of the year.

Looking ahead, Teves said that she sees gold prices ending next year at $1,635 an ounce and sees prices averaging $1,650 an ounce in 2021.

“Participation so far has largely been limited to institutional investors and the official sector. As gold gains further upward momentum, we think other areas in the market can become more active and support the next leg higher,” she said.

Not only will investment demand remain strong throughout the next two years, Teves said that she expects physical demand to eventually pick up as consumers adjust to higher prices.

Her latest comments come as gold prices have remained resilient in the face of renewed momentum in equity markets, rising bond yields and a stronger U.S. dollar. Despite the headwinds, gold prices have managed to hold critical support above $1,500 an ounce.

December gold futures last traded at $1,517.70 an ounce, up 0.36% on the day.

In a report published last week, Teves said that the fear of missing out (FOMO) in the next gold rally is encouraging investors to buy the dip.

“The market has generally been prone to the 'fear-of-missing-out' (FOMO) this year, with many participants missing gold's upswings,” she said. “Given potential upside catalysts in the coming months such as a dovish Fed and trade uncertainty, there is a risk that investors once again get left behind.

Teves said that technically, there is room for gold to fall to $1,450 an ounce in a potential correction, but so far that scenario hasn’t emerged.
“Prices may well hold better than expected as investors start rebuilding positions ahead of those levels for fear of missing the move yet again,” she said.

But its more than just gold

Teves said that she is also bullish on silver and is expecting prices to end the year near $20 an ounce.

For 2020, Teves said that she sees an average silver prices of $19 an ounce; the precious metal is expected to average 2021 around $19.80 an ounce.

“We expect silver to continue benefitting as gold's bull-run continues,” she said. “Although we think risks to silver prices are skewed to the upside, for now we are not convinced that the gold:silver ratio can fall back to the long-term average below 60.”

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.