Gold is looking at $1,700 in 2020 and $2,000 in 2021/22: Citi
(Kitco News) With prices holding above $1,600 an ounce, one major U.S. bank is reversing its projections for the year.
Citigroup said that it expects gold to hit $1,700 in the next six to 12 months and $2,000 in the next 12 to 24 months.
Behind this optimistic view is gold’s resilience in light of often rallying equity markets and strong a U.S. dollar, CNBC quoted Citi’s analysts led by Ed Morse as saying on Wednesday.
“Gold should perform as a convex macro asset market hedge, resilient during ongoing risk market rallies but a better hedge during sell-offs and vol spikes,” the analysts wrote.
Investors are becoming more concerned with where the economy is going, upcoming U.S. elections, and the many uncertainties that still surround the U.S.-China trade war, the analysts noted.
Gold also stands to benefit from the coronavirus’ economic fallout as the precious metals can “outperform on a risk market unwind should coronavirus risks impact supply chains and thus U.S. earnings momentum,” Morse pointed out.
On top of that, the low-interest-rate environment is supportive of higher prices, with the Federal Reserve more likely to cut than not.
“With STIR [short-term interest rate] markets pricing in ~1.5 Fed cuts in 2020 and global growth risks skewed to the downside, gold is a direct beneficiary of the low nominal and negative real yield environment,” according to Morse.
Gold surprised investors this week as it breached the critical $1,600 an ounce level on Tuesday, rising more than 1% on the day amid fears of a more significant economic impact from the coronavirus.
On Wednesday, April gold futures were holding their gains, last trading at $1,609.80, up 0.39% on the day.