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UBS sees gold prices averaging around $1,600/oz in 2020

Kitco News

Editor's Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It's a showdown of global proportions, so don't miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.

UBS said the current backdrop is “quite supportive for gold,” looking for the metal to average around $1,600 an ounce this year, although analysts also offered some caution about the early-year gains. Heightened U.S.-Iran tensions on Monday sent gold to a roughly seven-year high, before the metal pulled back some. “Macro factors are boosting gold's appeal as a hedge against uncertainty and a diversifier for investor portfolios,” UBS said. “Seasonally, January also tends to be a strong period for gold due to a combination of physical demand in China ahead of the Lunar New Year holidays and investor allocations are built as portfolios are rebalanced at the start of the year. Our base case is for gold to trade through and average around $1,600 this year.” Still, analysts said investors need to consider several other factors, including the thin liquidity early in the year, which can exaggerate price moves. “Reading too much into recent moves and extrapolating them remains tricky at this stage,” UBS said. “Second, we are cautious about the volatility and sustainability of the impact of geopolitical uncertainty on gold prices. Further escalation would likely see a ramp-up in safe-haven demand for gold, but the bar for persistent and significant price responses tends to increase as the uncertainty drags on. Conversely, we expect de-escalation to swiftly unwind gains.” There would be a more sustained impact on gold if the uncertainty filters through to inflation and growth, the bank continued. “That said, lingering geopolitical uncertainty does further strengthen the case to include gold in a diversified portfolio, so at the very least would add to the resilience of strategic flows,” UBS said.

By Allen Sykora of Kitco News;


FXTM: $1,555 to be key chart level for gold

Tuesday January 7, 2020 09:10

Gold pared some of its sharp gains from Monday, and the $1,555 area will be a key chart point, said FXTM. As of 9 a.m. EST, spot gold was up $2.30 to $1,567.50 an ounce. Gold soared early Monday on Middle East tensions in the aftermath of a U.S. drone airstrike last week that killed an Iranian general, with Iran vowing retaliation. “Tensions in the Middle East are likely to stimulate risk aversion, consequently boosting investors’ appetite for gold,” FXTM said. “Although prices have strong bullish momentum, further upside will depend on how prices react around $1,555. The precious metal should trend higher towards $1,600 as long as $1,555 proves to be reliable support. Alternatively, a breakdown below this level may open the door towards $1,535.”

By Allen Sykora of Kitco News;


TDS: further Mideast tensions could send gold to $1,600/oz

Tuesday January 7, 2020 09:10

Gold could hit $1,600 an ounce if Middle East tensions continue or get worse, said TD Securities. The metal is consolidating early Tuesday but soared Monday on worries about a military conflict between Iran and the U.S. “The serious escalation in tensions between the U.S. and Iran, after a U.S. raid near [the] Baghdad airport killed General Qassem Soleimani — a politically important head of Iran's elite Islamic Revolutionary Guard Corps' Quds Force — drove investors towards safe havens and away from risk assets,” TDS said. There is a fear that that Iran will retaliate against U.S. interests, plus worries that there is now “a permanent increase in the Middle East tensions,” TDS said. This can lead to “sky-high” oil prices and slower global growth, signals which Monday prompted investors to send gold to its highest since April 2013, TDS said. “The risk of increasing geopolitical tensions and a potential negative supply shock originating from the oil market could well mean that gold can move north of $1,600 should tensions escalate further, which also would help to send the rest of the precious metals complex to new multi-year highs,” TDS said.

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