Jeffrey Christian: Gold price to test $1,300

Gold prices are likely to test the $1,300 per troy ounce mark next week. That's according to analyst Jeffrey Christian of the CPM Group in an interview with Bloomberg. According to him, the rise in the price of gold in recent months is the result of a combination of factors.

Investors are not only concerned about the economy, but also about various political developments. He sees similarities between last year's rally in gold and that of recent months, but adds that this year is likely to be even more treacherous.

Can the gold price go to $1,300 per troy ounce?

I think we're going to test the $1,300 mark. I don't know if we'll break through that next week. However, we do expect the price to rise above that level in the first quarter and I think we will have a Gold price of $1,300. Maybe there will be a small correction after that.

What is the cause of this? Is the weaker dollar a driver of gold price?

I think it's a combination of things. The weaker dollar certainly plays a role, but so do concerns about economic growth, stock market volatility and the sharp declines in the US stock market in recent days. But concerns about global economic growth and political issues from Brexit to Trump also play a role. But I would just like to say the following about it. We had a similar kind of optimism over the past year with a bull market in the first quarter, but then it evaporated again.

What do you expect for gold in the coming years?

We are now in a situation similar to 2018. But 2019 is not the same as 2018, we are a year later and the budget deficit has increased from $700 billion to $1,200 billion. We have a divided Congress in the United States and the chance of a second referendum on Brexit has risen from 5% to a 50/50 chance. So I think the political environment, the trade war and all sorts of other factors that came up last year are going to make 2019 much more treacherous than 2018.

President Trump is seeking re-election in 2020. Won't he be afraid to torpedo the U.S. economy with a trade war? Won't he moderate his tone?

I decided at university not to get involved in psychology. I'm not sure if he wants to win in 2020 and if he'll stay president. Maybe there will be a race between Pence and Biden. I expect that in 2019 we will see some very big developments, both politically, economically and financially. It's not so clear to me exactly what Trump wants or what he will do to achieve what he wants. What he wants seems to change every day.

The copper price broke through $3 last summer and has fallen quite a bit since then.

We've seen improvements in supply and demand fundamentals. There's more supply, but I think people are overestimating the weakness of the Chinese economy. One of the things we need to investigate is the decline in Apple stock during the holiday season due to fewer Chinese purchases of Apple devices and to what extent that is the result of the arrest of Huawei's top executive. Maybe people in China are now buying Huawei phones instead of Apple phones. That's quite possible.

I think there is still strength in the Chinese economy. We will probably see some weaknesses, some structural problems, but the economy is in a much better state than that of Europe and the United States. I expect more economic problems in the US and in Europe than in China at the moment.

Central banks are raising interest rates. Do you think the debts will cause problems?

I expect that there will be many more economic and political problems because of the huge debts. Not only the public debt, but also the corporate debt and other private debt that has accumulated over the past ten years.

And what about house prices? In Sydney, we see a decline due to concerns about China.

The housing market is in a bad position worldwide. Trump tried to put the blame on the Federal Reserve's interest rate hikes, but the weakness in the U.S. housing market is much broader. There are also problems in Canada, China, Europe and Australia...

It spreads all over the world. And there are no easy solutions, because the weakness in the housing market in all these countries is the result of a wide range of causes. It's not one identifiable problem. You can stop raising interest rates now, but that won't solve the problems in the housing market in the United States.

In Sydney, house prices are 11% lower than the peak in 2017. In London, we have yet to see the decline reflected in the figures.

London has been devastated by Brexit. A significant portion of the UK economy is financial services. And those people are going to move to Dublin, Amsterdam and Frankfurt. That's devastating for London's housing market, and the government doesn't seem to be taking into account the economic consequences of Brexit. That's a real problem and it's not going away anytime soon.

Gold price nears $1,300 per troy ounce (Source: Goldprice.org)