Gold quotes only by the end of the third quarter will move to steady growth and step over $ 1,900 per ounce. At the same time, the entire period will be quite even – without peaks and falls, after breaking through the $ 1,800 bar in early July, analysts interviewed say Herald of the Gold Producer.
According to Head of Precious Metals Operations Department, UBRD Evgeniya Afanasyeva, linear growth should not be expected. “Most likely, we will observe strong volatility associated with the frequent transition of investors from safe assets to riskier ones and vice versa,” he said.
Such dynamics are dictated by the great uncertainty of the global economic recovery, the threat of a second wave of coronavirus, as well as the possible resumption of the trade war between the United States and China.
“After an almost continuous rally that began back in June last year, the gold market today looks technically overheated,” said Otkritie Broker commodity market analyst Oksana Lukicheva… – Since the beginning of the year, the growth rate has accelerated under the influence of the pandemic. Investors are actively using gold as a stabilizer for portfolios amid continuing low interest rates and an unstable economic situation. “
Uncertainty as a factor is still present on the market, and continues to affect the price of the precious metal – the peak of the coronavirus pandemic has not yet passed, in addition, the likelihood of a second wave of COVID-19 is already worrying experts.
According to Ole Hansen, Chief Commodity Strategist at Saxo Bank, the game to raise the price of gold will not pay dividends soon.
The damage caused to the global economy by the pandemic will become even more pronounced in the third quarter. The second quarter was mainly devoted to “extinguishing fires” and preventing collapse, and only now the restoration work is seriously beginning, – experts at Saxo Bank believe.
Analysts expect a gradual increase in the price of gold only by the end of the quarter. In general, there will not be a strong decline in price in the near future, as well as there will be no breakthrough growth.
According to Lukicheva’s calculations from Otkritie Broker, the average gold price in the third quarter will be $ 1,793 per ounce. In July, and probably in the first half of August, the market may remain sluggish due to the summer decline in activity, but from the end of August and in September, further growth is possible, and prices may exceed $ 1818.
“In the third quarter, one should not expect too much negative, although the demand for physical metal is still weak. The gold market entered a period of consolidation. Additional support for gold is provided by the expected decline in production,” Lukicheva said.
Chief Analyst at PSB Roman Antonov believes that most likely the price movement will be in a wide range – $ 1650-1850 per ounce – this is the baseline scenario, and in a positive scenario, we can see if not an update of the historical maximum, but an approach to $ 1900.
Afanasyev’s forecast of UBRD – reaching $ 1,800 per ounce in the third quarter – has already come true. In his opinion, fears of a second wave of coronavirus and the resumption of US trade wars, the political situation in Hong Kong, as well as geopolitical tensions between North and South Korea are supporting factors for gold as a traditional safe asset for investors seeking to hedge their risks.
Antonov from PSB agrees with all these factors that will continue to influence the dynamics of gold prices in the third quarter.
“The policy of low interest rates and the unlimited provision of liquidity from the central banks allows us to count on the continued inflow of investors in gold, now this is clearly visible in the dynamics of investments in ETF funds, which neutralize the weakness of global demand for jewelry,” Antonov said.
According to the World Gold Council (WGC), total net inflows to ETFs for the first half of 2020 were 734 tonnes at $ 39.5 billion, surpassing the previous record of 646 tonnes in 2009 for an annual inflow. In monetary terms, fund reserves in gold rose to $ 205.8 billion at the end of June from $ 195.1 billion at the end of May.
Of the significant events in the upcoming quarter, the US Federal Reserve meeting on July 29 is worth noting. Market participants can get a new view of the regulator on monetary policy in the near future. Also noteworthy is the Brexit process and measures to support the economy in key jurisdictions, in particular in the EU.
According to Antonov, the strengthening of the dollar, as well as the general positive sentiment around the prospects for the world economy, can negatively affect the dynamics.
At the same time, Lukicheva notes that the expected rise in inflation will push up the price of gold and further – by the end of the year.
Saxo Bank experts emphasize that currently many favorable factors are offset by a decline in inflation, but this, according to their expectations, will be short-lived.
Thus, in the third quarter, gold has enough support factors, a number of which will replenish at the beginning of the fourth quarter, which will help the metal to rise to new historical peaks. Investment demand has been offset by both the decline in retail consumer demand and the decline in official purchases by banks, mainly due to the suspension of purchases by the central bank of Russia.
Gold Miner Bulletin