Gold: Consumers key to further rises toward $2,300 – ANZ

Gold continued its march higher through July, with the spot price hitting a record high of $1,981/oz earlier this week. Strong safe-haven demand, falling yields, rising inflation expectations and a weak USD have all contributed to this move. However, further gains are reliant on investor demand, with consumer demand showing no signs of recovery. All in all, strategists at ANZ Bank see the yellow metal trading at $2,300/oz on a 6-to-12 month view.

Key quotes

“There is no doubt that the backdrop remains highly constructive, with negative real yields for the foreseeable future. We have subsequently revised up our 6-to-12-month target to $2,300/oz. Even so, we are mindful that if economic sentiment improves in coming quarters, the hurdle for continued growth in investor demand may make the path to this level an arduous one.”

“Bond yields and short-term interest rates should stay low in nominal terms and negative in real terms for the foreseeable future. This will continue to minimise the opportunity cost of holding zero-yielding gold. The expansion of the monetary base also re-kindles inflationary concerns.”

“We see geopolitical risks rising. US-China tension and Brexit talks are ongoing, while Middle East conflicts persist. This should keep safe haven demand strong.” 

“The supply of USD and the scale of macro liquidity have the potential to keep the USD weaker. As a result, the current trends across our dashboard of economic indicators driving gold investment demand are all positive.”