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Gold prices to hit $2,000 in 2021 - ABN AMRO

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(Kitco News) - The gold market is still at risk of a short-term correction due to shifting investor sentiment, but the move past $1,800 creates a bright future for the precious metal, according to one Dutch Bank.

In a report Thursday, Georgette Boele, precious metal strategist at ABN AMRO, said that the stars continue to align for the gold market as prices have cleared an important psychological hurdle through $1,800 an ounce.

While reaffirming her outlook for gold prices to end the year near $1,900 an ounce, Boele updated her 2021 forecast; she said she now sees gold prices ending next year around $2,000 an ounce, up from her previous target of $1,800.

Now the psychological resistance of USD 1,800 per ounce has been surpassed. It seems that investors will only be satisfied if the former peak in gold prices at USD 1,931 per ounce is reached and taken out. Above that the important psychological level of USD 2,000 per ounce is within reach,” she wrote in the report.

However, she added that the market is still at risk of a short-term correction.

“Speculative positions are substantial and positions in ETFs are at an all-time high. If investor sentiment deteriorates, some of these positions will likely be closed,” she said. This will cause higher volatility in gold prices. We still expect a sizeable correction in gold prices in a risk off environment when the dollar is back in favor.”

Despite some potential weakness in the near-term, Boele said that investors should keep their focus on the long-term uptrend.

It is likely that this correction will be short-lived and be a buy-on-dips for investors eagerly waiting to step in,” she said.

Boele said that gold will continue to be an attractive safe-haven asset as interest rates are expected to remain low and governments continue to add to their burgeoning deficits.

Although the Federal Reserve is not expected to introduce negative interest rates, Boele said that real rates are already there and could fall even lower as inflation risks start to rise.

As long as there are expectations that the Fed would move to a form of yield curve control, the upside in U.S. Treasury yields is limited,” she said.

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