Gold prices ‘likely to keep rising’ amid strong demand
SENIOR SAXO BANK EXECUTIVE EXPECTS TO SEE PRICES AT $1,550 BY YEAR-END
With gold prices on the rise for more than a year now, Saxo Bank, the Danish investment bank, expects prices of the yellow metal to keep climbing as demand remains strong.
Ole Hansen, head of commodity strategy at Saxo Bank, said he expects to see gold prices at $1,550 (Dh5,692) by the end of this year, as global interest rates inch down, uncertainty rises, and as global economic growth slows down.
With bonds — the other typical safe-haven asset — offering negative yields, gold is now all the more attractive, Hansen said. In August, a rally in bond prices led to a sharp decline in yields, with some $16 trillion in global debt offering negative yields.
‘US low point ahead’
The drop in bond yields saw gold prices jump to $1,560, the highest closing price in years. Prices of the precious metal had been on the rise since May, though, jumping by around $190 since then, and trading now at nearly $1,463 an ounce.
“Growth fears have not really hit the US yet, and we firmly believe that the low point in US growth is still in front of us, not behind us,” Hansen said in an interview with Gulf Newsi.
“With the uncertainty coming with US elections and the general slowdown, I wouldn’t be surprised to see gold move back and make a new record high over the coming years, and that basically means moving back to the $2,000 level.”
For 2020, Hansen prices at over $1,700.
With the US Federal Reserve and the European Central Bank having both on a path to lower expects interest rates, this has only helped gold prices, and is expected to continue doing so.
The ‘Tina Effect’
But even as gold prices climb, indicating a rush towards safe assets, equities have also been gaining. The S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite are all currently trading around their alltime highs.
Hansen says it indicates a strong underlying demand for gold. He also attributes the demand for both stocks and gold to the ‘Tina Effect,’ an abbreviation for ‘There Is No Alternative,’ especially at a time when liquidity is strong because of lower interest rates and bonds are offering negative yields.
With a continued hunt for returns, “that cheap money needs to go somewhere,” Hansen said.