Gold might not be able to sustain $1,800 in the near-term - National Australian Bank
The gold price continues to hold near its highest level in more than eight years but according to one market analyst the precious metal is walking a precarious tightrope in the near-term as prices continue to test critical resistance around $1,800 an ounce.
In an interview with Kitco News on the sidelines of the Mines and Money online connect virtual mining conference, Lachlan Shaw, head of commodity research at the National Australian Bank, said that a sustainable move above $1,800 is going to depend on how the coronavirus continues to impact the global economy.
He added that if the COVID-19 pandemic continues to grow unabated then it will weigh on economic growth and force government and central banks to continue to flood financial markets with liquidity. However, if the pandemic starts to slow and economic activity picks up then stimulus measures could be cut back.
Although there is a lot of uncertainty surrounding gold’s near-term performance, Shaw said that the long-term trend for the precious metal remains solid.
“Once we get through the next six to 12 months I do think the gold price will crack $1,800. I don't know if it's in cards in the short term. But do think the price cracks out in a hundred and indeed, I think it will probably hit towards $2,000 an ounce on a 12 to 18 month view,” he said.
Long-term, Shaw said that investors can’t ignore the impact all the current stimulus measures will have on inflation.
“We have huge increases in government debt to GDP ratios. And the reality is reversing those things is really, really tricky,” he said.
While Shaw is bullish on gold in the long-term, he said that he is bullish all commodity and in fact gold could be the weaker performer in the marketplace.
Looking at the commodity space, Shaw said that if he had to rank potential performance, industrial metals looks the best, followed by oil prices and then gold coming in third.
“We're certainly quite positive copper on a 12 to 18 month view, really because of the prospects for sustained economic recovery and growth, given the massive stimulus that's been put into the global economy,” he said.