Gold is to end the year higher, spurred by faster inflation and political tensions in Russia, Syria and North Korea, according to Intesa Sanpaolo SpA, the best forecaster for the metal in the fourth quarter of last year.
Prices could take a V-shaped path this year, with a swoon coming mid-year as the US Federal Reserve raises interest rates, Intesa Sanpaolo analyst Daniela Corsini said on Tuesday.
Gold is likely to bounce back by the end of the year, reaching a high of US$1,350 per ounce in the fourth quarter, she said.
That would leave bullion at its highest level since September last year. Prices have risen 12 percent this year, supported by inflation concerns and a mix of geopolitical worries, including North Korea’s nuclear ambitions and US airstrikes in Syria and Afghanistan.
“Markets will surely remain nervous about this uncertainty,” she said by telephone from Milan, Italy. “If economic data in the US remains strong, then gold will regain its role as an inflation hedge.”
Bullion for immediate delivery dropped 0.3 percent to US$1,286.54 per ounce at 12:22pm in Singapore trading yesterday, according to Bloomberg generic pricing.
Silver could climb to US$19 per ounce by the end of the year, compared with yesterday’s price of US$18.2395 per ounce, Corsini said.
The metal has gained 15 percent this year.
Platinum and palladium are likely to face pressure from a slowdown in car demand in the US and China, she said.
For the physical gold market, India would see strong demand, while speculators in China maintain a preference for equities and other commodities, Corsini said.
Demand in India, the second-largest gold market, suffered a blow last year after the government withdrew larger bank notes from circulation.
In Europe, upcoming elections in France, Germany, and the UK will provide an impetus for gold buying.
The “impact of the [Indian] demonetization scheme has run its course, and we had very strong imports in February and March,” she said. “ETF [exchange-traded fund] demand will be correlated with safe-haven demand in Europe.”
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