In a new report titled Gold Focus 2018, Metals Focus says it sees the gold price hitting $1,450 per ounce before the end of 2018.
While gold has primarily been stuck within the US$1,310 to $1,350 range this year, it managed to rise 3.61 percent during Q1 2018.
The yellow metal gained some first-hand experience in market volatility during the period, as inflation gave it boosts while US Federal Reserve interest rate hikes brought pressure down.
Despite those ups and downs, many industry buffs have put their faith in gold. Rob McEwen of McEwen Mining (TSX:MUX,NYSE:MUX) gave an $1,800 prediction for gold this year, while John Kaiser of Kaiser Research gave a $1,600 to $2,000 range estimate.
Metals Focus attributes its more moderate gold forecast to a handful of reasons that it feels “underpin the investment case” for the precious metal, including:
- A weakening US dollar: The firm predicts that the US dollar’s downtrend will resume later in the year. “One key reason behind this is the impending tightening of monetary policy in the Eurozone, given that the euro accounts for nearly 60% of the dollar index,” the report states. It also mentions changes to US fiscal policy, which could have a ripple effect on the US dollar yield curve.
- Recent equity turmoil: Metals Focus believes equity prices are “premised on a bullish outlook for the US economy and healthy results in most other key markets.” However, it is concerned that this outlook is too optimistic, and believes volatility could spread across multiple markets, perhaps stoking gold.
- Overly optimistic views about the global economy: Additionally, Metals Focus says that while its general view is broadly optimistic, it sees the overall consensus on the near future as “too exuberant.” The firm notes that a trade war “cannot be ruled out anymore,” and says that changes to US tax laws could have less of an impact on the economy than markets have accounted for.
The firm anticipates that these and other factors will help gold break out of its current range and get back to an uptrend for the last six months of 2018. While its expectation for gold is that it will reach $1,450 eventually, Metals Focus has a full-year average forecast of US$1,345.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.