Gold could hit levels last seen in 2013 if the US dollar extends its slide and equity markets reverse.
Bullion at US$1,400 an ounce is “achievable” in the next two months, Stephen Innes, head of trading for Asia Pacific at brokerage Oanda Corp, said in an interview Thursday.
The Bloomberg Dollar Spot Index plunged to the lowest since 2014 after US Secretary of the Treasury Steven Mnuchin endorsed the currency’s drop at the orld Economic Forum in Davos, Switzerland.
And while global equity markets have repeatedly hit all-time highs over the past few months, gold is also on the march, rising to as much as US$1,366.15 an ounce on Thursday, its best mark since August 2016.
The metal for immediate delivery on Friday climbed 0.2 percent to US$1,361.12 an ounce, up 2.2 percent for the week, while an index of the dollar dropped by 0.5 percent.
Gold has climbed more than 8 percent since the middle of last month as the US dollar slumped and investors sought protection from a potential tumble in share markets and a resurgence of inflation.
Holdings of bullion in exchange-traded funds have grown to the largest since 2013, while money managers have more than doubled their net bullish bets on Comex since the middle of last month.
“We see a host of ongoing financial market drivers keeping the gold market tight,” Australia & New Zealand Banking Group Ltd (ANZ) analysts, including Daniel Hynes, said in a report Thursday. “Further weakness in the dollar and rising risks of a correction in equity markets, in particular, should be supportive.”
The US dollar’s decline has come amid expectations that other central banks, notably the European Central Bank and the Bank of Japan, are moving closer to cutting monetary stimulus.
In Davos, Mnuchin said that “a weaker dollar is good” for US trade, while US Secretary of Commerce Wilbur Ross said the US would fight harder to protect its exporters.
With the US dollar “prone and defenseless,” these comments added “fuel to the fire,” Singapore-based Innes said.
With these signals from the US government and other central banks, “we’re getting into a structurally weak dollar, and on a macro level, we could be moving into a cyclical bear market beyond 2018,” Innes said. “All I can possibly see right now, given this overriding weaker dollar narrative, is for gold to go higher in the short term.”
ANZ sees prices holding at current levels in the first half of this year, before pushing toward US$1,400 by the end of the year.
A cap on the US dollar this year would be useful to US trade and managing the country’s escalating debt burden, said Gavin Wendt, senior resource analyst at MineLife Pty, who also sees gold hitting US$1,400 this year.
Spot silver climbed and platinum rose for a third day, while palladium fell.
Vanadium has soared more than 130 percent in the past year, outperforming better-known battery components like cobalt, lithium and nickel.
Vanadium pentoxide, a powder form of the metal used in batteries and the steel industry, has rallied 27 percent this year to US$12.38 a pound, Metal Bulletin PLC said.
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