Gold prices fell in April but seem to be giving back their gains for the year already, even as analysts predict that the prices could still gain as much as 20% in 2019.
“In 2019, capital has been flowing into stocks, U.S. Treasuries, and recently, the U.S. dollar,” says Taki Tsaklanos, a founding author at financial analysis provider Investing Haven. After the rise in the prices of gold earlier this year, “investors bumped into gold’s bear market wall [of $1,375 an ounce]. This bear market wall proved to be too stubborn, so capital found its way to other defensive asset classes,” he adds.
U.S. benchmark stock indexes have climbed — the S&P 500 and Nasdaq recently hit records — and the dollar has strengthened in 2019. However, the financial analyst has described gold to be a “bargain” at less than $1,300, with Investing Haven’s price target for the year being $1,550.
According to Tsaklanos, a stronger euro, relative to the greenback, would make gold more affordable in that currency. Lower rates would also make it more attractive versus U.S. bonds as more bullish speculators put upward pressure on prices. All three have shown signs that they could drive up the prices of gold later in 2019, Tsaklanos asserts, with higher inflation also supporting the cause.
The demand for gold rose in Q1 2019 to 1,053.3 metric tons, a 7% increase compared to the same period last year, according to a World Gold Council report released Thursday. Global investors added 40.3 metric tons to gold-backed exchange-traded fund holdings in the same period, a 49% increase compared to the same period last year.
Emerging-market demand for gold-related investments and jewelry has been identified as one of the possible factors to influence the price of gold according to George Milling-Stanley, head of gold strategy at State Street Global Advisors.
Milling-Stanley stated that gold has traded in a “narrow range, oscillating around $1,250 per ounce” since spring 2013. He’s “not predicting a major move outside that range,” but does see the “possibility of a short-term gain of close to $100 in the coming six to 18 months, if gold climbs back to challenge overhead resistance around $1,350.”
The price of gold seems to be declining at the moment considering that is entering a seasonally weak period for precious metals, with June among the year’s worst months, says Tsaklanos. “The wildcard is monetary policies of central banks,” he says, with an unexpected policy change potentially leading to a sharp selloff in the euro, further weakening gold.
But Tsaklanos expects “the gold market to build up energy during the summer.” Any breakthrough, he predicts, “is likely going to happen in October or November, and it would pave the way to $1,550.”
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