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The gold price will continue to rise this year due to a continued flight to safe havens and the lack of an interest rate hike by the US central bank. That Writes Georgette Boele, precious metals and currency analyst at ABN Amro. According to her, the upward trend in precious metals is still intact and the outlook is still very positive due to recent developments such as 'Brexit'.
At the beginning of this year, Boele raised her target price for gold to $1,300 per troy ounce, due to the lack of an interest rate hike by the US central bank and the expectation that other central banks will also stick to a very loose monetary policy for a long time to come. It later raised its price target for gold to $1,350 in September and for silver to $20 per troy ounce in December, but these prices have already been reached. This was reason enough for ABN Amro analyst Boele to raise the forecast for the Gold price further up.
In the new report, Boele writes that an interest rate hike by the U.S. central bank this year is very unlikely, but that the precious metals may show a small correction later this year similar to that of May. At that time, the prices of gold and silver were put under pressure due to the expectation of an interest rate hike in the US. A new attempt by the Federal Reserve to raise interest rates in the second half of this year could put some pressure on the gold price in the fourth quarter , Boele notes.
Meanwhile , the flight to safe havens continues, with gold becoming an increasingly interesting alternative to government bonds due to falling interest rates. The flight to safe havens is strong and Boele foresees that this trend will continue to prevail and therefore continue to support the gold and silver prices.
Despite the increase in the price of gold and silver since the beginning of this year, the precious metals are not yet expensive. Boele compares the situation with 2011 and 2012, when the prices of both gold and silver were much higher. Not only in dollars, but also in other currencies such as the euro, the British pound and the Japanese yen.
Boele expects an improving economy in the United States, which will cause inflation in the US to rise further. Combined with persistently low interest rates, this means a further decline in real interest rates. This is also a positive sign for gold and silver, as both precious metals have historically been negatively correlated with interest rates. That is, gold benefits from falling interest rates and usually falls in an environment with rising interest rates.
Negative real interest rates are positive for gold and silver (Source: ABN Amro)
The price of silver has risen by 42% since the beginning of this year in euros, while the price of gold is up 26%. Silver has already caught up with gold in recent months, but according to Boele, there is much more potential in the grey precious metal. Due to the growth of the global economy, the demand for cyclical precious metals such as silver, platinum and palladium will increase sharply. As a result, the silver price may rise even faster than the gold price in the near future. For the end of 2017, Boele foresees a price of $24 per troy ounce for the precious metal, which is an increase of 20% compared to the current level.
ABN Amro expects gold and silver prices to rise (Source: ABN Amro)
