Gold price steadies after record-breaking run

Gold bars produced at the Brucejack gold mine. Credit: Pretium Resources.Gold bars produced at Pretium Resources' Brucejack gold mine in British Columbia. Credit: Pretium Resources.

Gold prices held steady after a record-breaking rally that saw the spot price hitting new highs and futures touching US$2,000 per oz. for the first time.

Spot gold continued its historic run earlier on July 28, setting a fresh all-time high of US$1,980.55 per oz. before pulling back on investor profit-taking. Spot was up 0.3% at US$1,950.17 per oz. by 11:20 a.m. EDT.

U.S. gold futures returned to US$1,966.60 per oz. after reaching the US$2,000 per oz. milestone, but were still up by 0.5%.

“Gold was way overbought and needed to correct,” StoneX analyst Rhona O’Connell told Reuters. “But at the moment everything is supportive; negative interest rates, intensifying geopolitical tensions and massive uncertainty surrounding the economic and financial fallout from the virus.”

The U.S. Federal Reserve, which is holding a two-day meeting that concludes on July 29, may provide more direction for the bullion market. There are some expectations that setbacks in the global fight against the coronavirus pandemic will push Chairman Jerome Powell to signal that rates will stay near zero for longer.

Most banks remain bullish on the yellow metal, which has rallied over 27% so far this year, supported by growing doubts over an economic recovery from the Covid-19 pandemic and escalating geopolitical tensions.

Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG’s wealth-management unit, told Bloomberg: “Debasement of the US dollar, the more negative real rates, and you’ve still got lingering uncertainties around geopolitics and the U.S.-China relationship. That combination of things is what’s pushing gold harder.”

“Periods of consolidation should be healthy, and long-term investors are likely to take advantage of dips to build positions,” UBS said in a note, raising its 2020 average gold forecast to US$1,740 from US$1,650.

Goldman Sachs also raised its 12-month forecast for gold to US$2,300, expecting further pressure on the dollar, while analysts at BNP Paribas expect prices to consolidate around $2,000 before increasing again.

Meanwhile, a more optimistic outlook was given by Barry Dawes, executive chairman at Australia investment firm Martin Place Securities, who predicted that gold “could hit $3,500 in two years.”

— This article first appeared in The Northern Miner and are part of Glacier Resource Innovation Group.


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