The only gold price question one Scotiabank strategist is asking is how sharp is the uptrend
(Kitco News) - Gold’s recent disappointing performance is not affecting sentiment at the world’s largest mining conference as one market analyst expects prices to continue to push higher through 2020.
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Nicky Shiels, commodity strategist at Scotiabank, kicked off her precious metals outlook, at the Prospectors and Developers Association of Canada 2020 conference in Toronto, Canada, by declaring that “Gold was back in vogue,” and embarking on a new uptrend.
She added that the only question for the precious metal is the trajectory of the uptrend for 2020. Looking at prices, Scotiabank Strategy has increased its forecast for the year; Shiels said that she sees gold prices pushing to $1,750 an ounce and averaging the year at $1,625 an ounce, a 1.5% increase from the previous forecast.
In the medium to long term, Shiels noted that there is a possibility that prices rally to $1,900 an ounce.
Her comments come as gold prices see a positive start to the week after Friday’s sharp selloff. Sunday evening, gold prices pushed back to within striking distance of gold. April gold futures last traded at $1,584.20 an ounce, up more than 1% on the session.
Growing fears that the spreading coronavirus will weigh on global growth, a dovish Federal Reserve, weaker U.S. dollar and equity market volatility will all support gold prices, said Shiels. Even with gold holdings in exchange-traded products at record highs, the analyst said that there is still room investment demand to grow.
“Gold remains an investment story,” she said. “Generalist investors remain underweight gold. Investors owned three-times more gold in their portfolio when prices peaked in 2011.”
Shiels added that even with the near-panic sentiment in the marketplace, gold’s fear premium is only around $60. She said that historically, this fear premium has swung plus or minus $200.
“Gold hasn’t priced in peak fear,” she said.
Shiels added that she is also bullish on gold as the yellow metal continues to dominate currency markets. She noted that gold has hit record highs in all major currencies except the U.S. dollar.
She added that it is only a matter of time before the U.S. dollar becomes the next shoe to drop.
“Gold is a reliable hedge against growing U.S. debt,” she said. “Enormous deficits bring into question the role of fiat currencies.”
Looking at silver, although Scotiabank Strategy is bullish on the metal, Shiels is not as upbeat as she is compared to gold.
The analyst said she sees silver prices averaging the year around $19 an ounce.
Fundamentally, Shiels said that the silver market is oversupplied; however, prices should follow in gold’s slipstream.
“Silver will remain a cheap high beta gold proxy,” she said.
Scotiabank Strategy is also bullish on Platinum Group Metals as a whole. Shiels said she sees prices platinum prices pushing back above $1,000 an ounce and palladium could go as high as $3,000 an ounce.