ABN Amro expects gold prices to rise in 2019

ABN Amro expects the gold price to rise over the next two years, as the precious metal will benefit from a weaker dollar and increasing demand from China. In a new report analyst Georgette Boele expresses her expectation that the Chinese yuan will rise, which will increase the purchasing power of the population there. This will give a boost to the gold price, as China is the most important market for the precious metal.

Boele notes that in recent years there has been a strong correlation between the Chinese yuan and the Gold price. A depreciation of the yuan against the dollar is seen by dollar investors as a sign of weakness in the Chinese economy. Since April, the yuan has depreciated by 105, which has also put pressure on the price of gold. Boele expects the Chinese central bank and the government to support the yuan from its current level, which will improve sentiment among Chinese investors and increase interest in Buy gold will increase.

Strong correlation between gold price and Chinese yuan (Source: ABN Amro)

Weaker dollar

ABN Amro's analysts believe that both the US dollar and the 10-year yield have peaked and that economic growth will also weaken. For the next two years, the bank foresees a decline in 2-year and 10-year yields, despite an expected rate hike in December 2018 and in the first half of 2019. Rising inflation will put pressure on real interest rates over the next two years, causing the dollar to weaken. As a result, according to the ABN, we can expect an increase in the gold price.

In addition to a weaker dollar and the stronger yuan, the bank sees a third reason to be positive on the precious metal. The latest figures from the futures market show that speculators have a neutral position on the price of gold. Once the gold price starts to rise, speculators with a short position will want to hedge it, which can further boost the price of gold. Especially if the gold price rises above the 200-day average of $1,260 per troy ounce, this will have a positive effect on the price.

Speculators do not expect a rise in gold prices yet (Source: ABN Amro)

Higher gold price

In the new report, ABN Amro gives gold a price target of $1,400 per troy ounce for the end of 2019 and $1,500 for the end of 2020. It is striking that the bank is very positive about silver. They expect the price of this precious metal to rise to $18 by the end of next year and $20 by the end of 2020. The bank expects platinum to recover in the coming years, while palladium will lose some ground. Below you can see all the price targets for the different precious metals.

Price targets for gold, silver, platinum and palladium (Source: ABN Amro)

This contribution was made from Geotrendlines