Gold to stabilize at $1,400 in 2020 then peak above $1,600 in 2021 - Macquarie
(Kitco News) After rising to the highest level since 2013, gold prices are likely to retreat and stabilize around $1,400 an ounce next year before rallying again to $1,600 an ounce in 2021, according to one Australian bank.
In its latest report, Macquarie asked whether there is more upside in gold prices after investors across the globe upped their exposure to the yellow metal amid a flight to safety.
“Investors worldwide have already substantially boosted their exposure to the metal, net-length in CME futures and ETF holdings are oscillating around all-time highs recently – while the price has reported historic highs in almost all major producer and consumer currency-terms," wrote Macquarie's commodities strategists at the end of October.
Macquarie's analysis into gold's upside is very timely as prices tumbled to three-month lows on rising risk appetite amid positive U.S.-China trade headlines and rallying stock markets. December gold futures were last at $1,464.70, down 1.90% on the day.
One of the main concerns cited by the Australian bank was a correction to gold at such high levels.
"If global growth improves or if risk sentiment is lifted by a stabilization of the geopolitical backdrop in the U.K., U.S. and Middle East, this could ultimately impact the price," the report said.
Going forward, Macquarie expects gold prices to stabilize around the $1,400 an ounce level in 2020.
The move is likely to be "underpinned by on-going central bank buying and increased long-term investor allocations both offsetting the retracing of short-term positioning to more sustainable levels."
After a steady correction, gold will strengthen once again, but this time for longer, peaking above $1,600 an ounce in 2021, added Macquarie.
"Structurally subdued real rates [will] pare the long-term opportunity cost of holding gold," the strategists said. "Certainly, while global growth is kept on life support by very easy monetary policy, the outlook for gold's price should remain positive. Our forecast peaks above $US 1,600/oz in 2021."
Things can go wrong for gold next year if there is a swift and comprehensive resolution to the U.S.-China trade conflict or a sustained recovery of global growth and business investment, the report warned.
"The biggest risk for this gold outlook? A comprehensive, credible resolution to the US-China trade conflict; fiscal policy taking up some of the heavy lifting of the monetary authorities; and a sustained recovery in business investment and global economic growth," Macquarie said.