The head of commodity strategy for Saxo Bank says there are several reasons to believe gold will continue to move higher in the second half of 2020, predicting a fresh record high for the precious metal in the coming years.
Spot gold futures traded at $1,772 per ounce on Thursday afternoon, up around 0.2% for the session.
The so-called safe-haven asset briefly touched $1,807 per ounce on Wednesday, notching its highest intraday level since September 2011 when it traded as high as $1,819 per ounce.
The near nine-year peak for gold came after promising results from a Covid-19 vaccine trial boosted hopes for a faster-than-expected economic recovery.
Saxo Bank’s Ole Hansen said in a research note on Thursday that gold had recently settled into a range of around $1,700 per ounce. It follows a “rollercoaster ride” in April when global coronavirus lockdown measures were at their peak.
Nonetheless, he highlighted that the yellow metal remains the only “key” commodity to show a positive return so far in 2020.
“Gold’s ability to frustrate, then eventually reward, the patient investor is likely to be on full display during the third quarter,” Hansen said in Saxo Bank’s third-quarter outlook.
Saxo Bank said reasons to support a gold rally in the second half of the year included the “political need” for higher inflation to support debt levels, a rising global savings glut and raised geopolitical tensions ahead of the U.S. presidential elections in November.
A positive change in the fundamental or technical outlook was likely to “force traders off the fence and back into the market,” Hansen said, before adding this development could push gold higher.
Sustainable strength ‘just as likely’ as all-time highs
The bullish forecast comes shortly after analysts at Goldman Sachs said they were also expecting gold prices to rally even further in 2020, citing debasement fears and a weakening U.S. dollar.
In a research note published on June 19, analysts at the U.S. investment bank updated their three-, six- and 12-month gold price forecasts to $1800/1900/2000 per ounce, respectively.
However, analysts at RBC Capital Markets were notably more cautious about the prospect of a sustained rally in gold prices over the coming months.
“At the moment, in our view, sustainable strength in the $1,600s and $1,700s per ounce is just as likely as achieving successive all-time highs,” analysts at RBC Capital Markets said in a research note published June 25.
“Overall, it is clear that the price risk for the gold market has clearly moved to the upside. Something that has not changed in our view though is that the shape the recovery takes is the swing factor between our gold price scenarios,” they continued.
“As such, the recent increase in Covid-19 cases and the resultant rise in economic uncertainty has evened the probability playing field for two of our forecast scenarios at the very least.”