(Kitco News) Even though gold is currently trading more than $250 off its record highs seen in August, the current risk-on sentiment will not reverse gold's long-term course higher, according to Australia and New Zealand Banking Group (ANZ).
After the latest selloff this week, gold is now trading just above its critical support level of $1,800 an ounce. At the time of writing, December Comex gold futures were trading at $1,806.80, up 0.07% on the day.
"With the prospects of an imminent coronavirus vaccine, the likelihood of a strong global recovery and a rally in risk assets continues to improve. This could take some shine off from gold's haven appeal. [But] we don't think it will scuttle gold's current rise higher," said ANZ in its weekly commodity call.
Vaccine news and a more upbeat outlook for next year do not change the macro environment responsible for driving gold higher this year, ANZ pointed out.
"Gold's main drivers, real interest rates and the U.S. dollar, are likely to provide support over the coming year. Using the U.S. Federal Reserve's forecasts for rates and inflation, real rates should continue to push into negative territory. And a strong global growth pulse should see the USD weaken further."
What this outlook means for gold is that prices will remain elevated next year and are likely to climb to $2,100 an ounce next year.
"Our gold valuation model suggests gold should trade around $2,100/oz next year, assuming U.S. inflation rises to 1.7%, USD index falls to 90 and yields on 30Y bonds hold steady around 1.6%," ANZ noted.
The bank also recognized some short-term obstacles for gold, including the rally in equities and a rotation out of gold-backed ETFs.
"We have cut our 0-3 month target to $1,900/oz. However, we maintain our 12-month target of $2,100/oz," ANZ added.
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November 27, 2020 at 12:03AM
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Vaccine not to 'scuttle gold's current rise higher,' says ANZ - Kitco NEWS
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