Gold Will Surge Above $1,600 An Ounce
Gold will surge above $1,600 an ounce as the Federal Reserve embarks on a quartet of interest rate cuts to combat slowing U.S. growth and the fallout from the trade war with China, according to BNP Paribas SA, which flagged prospects for a significant rise in prices in the coming months.
Gold has soared this year on increased demand for havens as the U.S.-China trade war damages global growth, prompting central banks including the Fed to adopt a more accommodative stance.
“The trade war is unlikely to be resolved quickly,” Tchilinguirian said. “In this context, gold has resumed its traditional role as a safe-haven asset” and holdings in ETFs are now heading toward peak levels seen in 2012, he said as BNP boosted price forecasts for this year and next.
Gold will average $1,400 an ounce in 2019, up $60 from an earlier forecast, and $1,560 in 2020 following a rise of $130 in the outlook, BNP said in the note. The Fed’s easing cycle should push average prices above $1,600 in the first quarter of 2020, it said, adding: “We expect gold to rise significantly.”
The four cuts would reduce the upper bound on the Fed’s benchmark rate to 1.25%, in line with current forward rates at 1.2%, Tchilinguirian said. The U.S. central bank “has acknowledged that risk mitigation relative to foreign conditions is part and parcel of its decision-making process.”
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