Gold may hit US$2,000 after ‘sugar high’: analyst
A flight to safety that sent gold to US$1,200 an ounce following Donald Trump’s first press conference this week could be the first sign that investors are starting to come down from their postelection “sugar high,” according to one longtime commodities expert.
Gold reached a seven-week high briefly Thursday as the U.S. dollar sank, but has since settled to end the week slightly under that psychological benchmark, at around US$1,198.
What caused the investor confidence crash? Not a tweet or a particularly outlandish comment, but, rather, what the president-
elect did not do: provide details of his ambitious economic agenda, which, apparently, includes infrastructure spending, tax reform and deregulation.
Many market observers have been turning more bullish on gold in recent weeks, focusing on a range between US$1,200 to US$1,300 an ounce this year once the reality of a Trump presidency sets in and investors get their head around a number of global uncertainties.
“The Trump rally is a sugar high. There are all kinds of questions and uncertainties about what Trump
does,” said Jeffrey Christian, managing director for New York-based research firm CPM Group.
“As 2017 progresses we think the economy will start looking top-heavy, the Trump euphoria, the sugar high, will wear off and people will realize the economy is not in that great of shape and the Fed will probably be restrained in raising interest rates which will be a sign to the financial market that everything is not hunky dory.”
Meanwhile, European elections and the Brexit negotiations could be further unnerving to financial markets and shake investors’ confidence in stocks and the economy. That means people will be looking for protection in gold, said Christian, who was in Toronto to present his outlook at the Scotiabank Commodities conference this week.
Christian believes bullion prices will hit US$1,300 to US$1,340 by the end of the year and reach new record highs of US$2,000 within the next decade. To support his bullish gold thesis, Christian pointed to three major trends in the gold market.