Gold outshines all safe havens – Commerzbank

The Gold price continues its upward trend at the start of the new week, moving closer to the $4,000 per ounce mark. Some media reports attribute this to the ongoing US government shutdown. While the shutdown may dampen the economic outlook for the US in the short term, it is unlikely to be the decisive reason for Gold's continued strength. US interest rate cut expectations have shown little movement in recent days after all. It seems more likely that political and, consequently, fiscal risks have recently become a greater source of uncertainty, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

Gold to trade at $4,000 by the end of this year

"The resignations of the prime ministers in both France and Japan have caused risk premiums on their respective government bonds to rise, fueling doubts about any significant fiscal consolidation in either case. At the same time, increased fiscal risks are also being observed for the US and the UK. The strong demand for Gold could therefore be explained, at least in part, by a lack of alternatives, as "typical" safe havens, such as government bonds from major industrialized nations, have recently become less attractive."

"In addition, in Switzerland, the central bank has made it clear that it is critical of an appreciation of the Swiss franc and stands ready to intervene in currency markets should movements become too rapid. We consider the Gold price to remain well-supported for now and even see further upside potential, given the significant US interest rate cuts we expect. We are raising our forecast to $4,000 per ounce by the end of this year and to $4,200 per ounce by the end of next year (previously $3,600 and $3,800)."

"Silver has also continued to rise, following in Gold's wake. The 'little brother' is likely to remain influenced by Gold for now. We are increasing our forecast to $49 per ounce by the end of this year and to $50 per ounce by the end of next year (previously $41 and $43)."