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Gold has benefited from an avalanche of favorable factors over the last few months, and some bulls are now seeing the precious metal hit a record $ 2,000 an ounce.
This will however require more fuel, and the timing of this recovery remains uncertain.
"There has been a strong current underlying the demand for gold," said Brien Lundin, editor of Gold Newsletter. "Even if short-term factors, such as the trade dispute with China, come and go, long-term investors are convinced that the problems of currency depreciation and other geopolitical factors will continue to affect market."
December on gold futures
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increased $ 3.40, or 0.2%, to $ 1,531.20 an ounce on Thursday to record the largest and most active contract settlement since April 2013, according to FactSet data. The record amount of forward price transactions was approximately $ 1,891.90 on August 22, 2011, although prices reached intraday highs near $ 1,918 around that time.
The concern over a possible recession, triggered by the recent reversal of the 2- and 10-year Treasury yield curve, poor global economic data and the first reduction in interest rates from the US Federal Reserve since 2008 have dressed the gold appeal as a refuge.
But Stan Bharti, chief executive of private investment bank Forbes & Manhattan, does not believe that gold is rising because of short-term market fears. It is a movement that has been long in coming.
After the 2003-2004 period, "durable assets were in demand because" smart money "was turning away from equities and turning to gold for protection," said Bharti. Over the last eight to ten years, we have seen a bull market in equities and lived in an environment of low interest rates. It is dangerous for inflation. "
In this context, he expects the price of gold to exceed $ 2,000 by the end of next year. It would be a record for Comex futures. In the shorter term, Bharti sees gold climb from $ 1,480 to $ 1,600 in the next quarter.
Gold climbing to $ 1,800 or even $ 2,000 an ounce is "almost a certainty, given the time required."
Lundin also agreed that higher prices are at stake for gold. The metal at $ 1,800, or even $ 2,000 an ounce, is "a certainty, given the time it takes," he said.
This increase will accelerate with every indication that the [Fed] will come back to [quantitative easing], "he added.A QE, or large-scale asset purchases by the central bank to help stimulate the economy and add liquidity to the capital markets, would be good for gold. This decision would likely put pressure on the dollar and could lead to inflation, even though central banks are struggling against stubbornly low inflation despite past QE cycles.Gold is often perceived as a protection against inflation. 39; inflation.
To see such a large upward movement for gold, the market may also need to see "the devaluation of the dollar in response to the devaluation of the Chinese yuan".
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said Deric Scott, vice president and senior analyst at Metals.com, a precious metals retailer.
Other factors likely to significantly increase the price of the metal include "increased geopolitical risks related to current events such as the Iran conflict, Hong Kong or any other unforeseen, but not surprising, action by a given nation. ", did he declare. Anyway, a rise to $ 1,800 or $ 2,000 for gold "will inevitably be inevitable, although the timeline remains to be determined".
At the same time, a Reuters report released this week that China has limited its gold imports since May has had little or no impact on gold prices. According to the report, China may try to limit cash outflows in US dollars and help strengthen its currency, the yuan, as its economy slows.
China, the largest importer of gold, has reduced its metal shipments from 300 ounces to 500 ounces over the previous year, the report quoted sources as directly informed. Last year, the country imported about 1,500 tonnes of gold, which is about one-third of total world supply, the report says.
"If true, this would be a major concern for the gold market," Lundin said. "If this ban is strictly enforced and has been going on for some time, I do not see how it would have little impact on global flows."
Even in this case, "the good news is that gold investor demand has increased worldwide, so this move seems more likely to slow the rise of gold than to stop it," he said. Lundin.
Nevertheless, Scott estimates that the move announced by China could lead gold to test a lower level between $ 1,463 and $ 1,485, and that "it would have been seen. [as] a huge opportunity to buy. "
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