(Kitco News) - The gold market may be looking a little fatigued in the short term as prices remain capped below $2,700 an ounce, but according to one market strategist, gold’s rally is far from over.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, has been bullish on gold and silver since the beginning of the year. In his Q4 outlook, he noted there is no reason to change his perspective just yet.
“We forecast further upside for gold by year-end and into 2025, when the yellow metal could potentially reach another psychological mark of $3,000,” he said in his report. “Supported by a stabilizing industrial metal sector, silver could potentially perform even better, particularly given its relative cheapness compared to gold. This could see it target $40 next year, representing a conservative estimate of the gold-silver ratio at 75, versus the current level of around 83.”
Hansen’s comments come as gold continues to consolidate at an elevated level. December gold futures last traded at $2,673 an ounce, up 0.13% on the day.
Despite his bullish outlook, in comments on social media, Hansen said he expects to see some consolidation in gold in the near term, as speculative bullish positioning remains at its highest level in four years.
Physical #gold demand is struggling as buyers balk at paying record-high prices. Instead, the current bid is being provided by speculators in the futures market, who may turn on a dime should the technical outlook change. My main reason for thinking the bullion market needs to…
— Ole S Hansen (@Ole_S_Hansen) October 2, 2024
“After hitting a succession of fresh record highs following a surprisingly large U.S. rate cut, prices are showing signs of stabilizing,” Hansen said in a recent note to Kitco News. “Some degree of buying fatigue is starting to emerge, raising the question of whether we are approaching a long-overdue consolidation or perhaps even a correction. According to my estimates, the price could fall by 4–6% without damaging the overall bullish sentiment, particularly since most of the supportive drivers are unlikely to disappear anytime soon.”
At the same time, Hansen also noted that higher prices are weighing on physical demand, as many retail consumers are being priced out of the market. In this environment, Hansen wrote in his latest note that he is maintaining his $2,500 year-end price target.
Despite the growing downside risks, Hansen said the market remains well-supported as the Federal Reserve begins its new easing cycle. He also noted that investors are starting to move back into gold-backed exchange-traded funds as interest rates fall, lowering the precious metal’s opportunity costs.
Hansen further commented that geopolitical uncertainty will continue to support gold’s safe-haven appeal.
