Multiple Analysts See Gold Rebounding in the Long Run

The general consensus is gold is in a position to retrace, it's just a matter of how far.

As gold approaches the finishing line for a lukewarm quarter, a recent Kitco article reveals multiple analysts see the metal rebounding as we move closer to December. In an interview with Kitco, ICBC Standard Bank commodities strategist Marcus Garvey stressed that gold's lack of performance this summer is merely the result of an outperforming dollar.

However, the greenback could be testing the limits of its rally in the near term says ABN Amro precious metals and diamond analyst Georgette Boele. In the article, Boele adds that her bank expects a moderate recovery in the Chinese yuan, which should further support gold through year-end.

Analysts also took note of the record net short positions amid gold traders, interpreting them as a sign that a rebound is close. In the article, Garvey pointed out that lower prices have an upside as they open up new windows for physical demand, especially in India. To him, this is a familiar set-up for a short-term rally, one that could be triggered by minute news of slower U.S. growth or improved U.S.-China relations.

The general consensus appears to be that gold is in a position to retrace, with various opinions as to how far. According to the article, FXTM research analyst Lukman Otunuga and TD Securities commodity strategist Ryan McKay both view $1,200 as a very important psychological level, adding that it would be a bullish sign if prices manage to hold above it. On the downside, the two analysts see $1,160 an ounce as the worst-case scenario. Kitco's senior technical analyst Jim Wyckoff feels that bearish sentiment in the gold market could be nearing exhaustion, and that prices should steadily move up beginning next week.

Predictions for the six-month period are more positive, as analysts agree that the metal could be bottoming out soon reports the article. ABN Amro sees the metal reaching $1,250 by December before climbing to $1,400 by the end of next year. Gold's recovery will move across the $1,200 range and potentially reach $1,300 an ounce within six months, said Garvey, who also dismissed the view of the dollar as a safe-haven competitor.

TD Securities said that a slowdown in the greenback's rally and a wrap-up of the U.S. hiking cycle will help gold prices rise back to $1,250-$1,275 before the end of the year. Capital Economics shared their bullish long-term outlook for the metal, stating that gold should thrive over the coming years due to a number of favorable factors.

These will include a fading fiscal stimulus and the possibility that the Fed will have to lower interest rates once again. Capital Economics commodities economist Simona Gambarini said that U.S. GDP growth will slow to 2.0% in 2019 and 1.3% in 2020, reintroducing the weakness in the dollar seen throughout 2017. Gambarini said that her firm sees gold reaching $1,350 an ounce by end-2019 and $1,400 by end-2020, adding that the metal will outperform the euro as it moves back up.