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Gold Still Attractive Investment, Prices To Rally To $1,420 In Q4 - Sucden

By Kitco News
Wednesday October 19, 2016 14:48

http://www.kitco.com/news/2016-10-19/Gold-Remains-An-Attract-Investment-Prices-To-Rally-To-1-420-In-Q4-Sucden.html


(Kitco News) - Although one international trading firm says gold might have a little farther to fall as the market prepares for an interest rate hike at the end of the year, its 2016 uptrend remains in place.

Financial Brokerage Firm Sucden is forcasting gold to hit $1,420 an ounce by the end of the quarterIn a recently published quarterly metals report, U.K. brokerage firm Sucden Financial warned that gold’s selling pressure since the start the fourth quarter might not be over as they expect gold to fall to a low of $1,230 an ounce in the near-term. However, ultimately, the firm expects gold to recover from its recent bout of weakness and end the year -- and the quarter -- near it top range target at $1,420 an ounce.

“We think the macro environment could deteriorate in the fourth quarter because of renewed Fed hawkishness that will put the metal under episodic selling pressure. Still, we think buying pressure will eventually resume owing to gold’s increasing attractiveness in a world of negative interest rates,” the analysts said in their October report.

The report comes as gold has managed to rally to its highest point in two weeks, pushing back above its 200-day moving average. December Comex gold futures settled Wednesday at $1,269.90 an ounce, up 0.57% on the day.






Despite growing expectations of a Federal Reserve rate hike at the end of the year -- CME 30-Day Fed Fund futures are currently pricing in a more than 60% chance of a move in December -- Sucden remains bullish on the yellow metal because the overall trajectory of U.S. interest rates continues to flatten.

“Although the Fed may lift rates once this year, we think it will remain ‘behind the curve’ for a long period of time because of its asymmetric capability to respond to macro shocks – U.S. monetary policy remains close to the zero lower bound,” the firm said. “The expected path of the Fed funds rate should therefore continue to flatten over the coming quarters and produce a friendly macro environment for gold.”

Sucden also expects that renewed central bank gold purchases will help support and drive prices moving forward.

“Central bank demand, accounting for 14 percent of total gold demand, is set to remain solid because reserve managers tend to view gold as an increasingly important asset in their diversification strategies. The pace of monetary demand for gold should therefore remain sufficiently robust in the coming quarters to offset the lackluster demand in the jewelry sector and push gold prices higher for longer, we feel,” they said.

Turning towards silver, the firm expects the grey metal to trade with a range between $16.80 and $20 an ounce over the next three months.

December Comex silver futures settled the day at $17.663 an ounce, up 0.15% on the day.