Spot Gold Price
That’s pretty impressive considering all the head winds gold has had to deal with, from competition from other asset classes (including stocks and bitcoin) to rising interest rates to slumping investment demand. Investors have pulled $1.2 billion from global gold ETFs so far in 2018, according to the World Gold Council.
Catalysts For A Rally
Joe Foster, portfolio manager and gold strategist at VanEck, doesn’t see that as a concern.
“Gold suffered a severe bear market that ended in December 2015. With all that selling behind us, there’s very limited downside risk in gold now,” he said. “It is being supported by a heightened level of global geopolitical risk, and the positive technical trend of the last two years is very constructive. It’s a market that’s waiting for a catalyst.”
That catalyst could come later in the year or in 2019. “I think gold will be range-bound in the $1,250 to $1,400 range for a while longer,” Foster predicted. “However, as we move closer to 2019, the current expansion will be on its last legs and the next downturn will come into view. With that comes financial risks that drive gold much higher.”
Maxwell Gold sees a similar bullish move for gold later this year, but thinks prices will head lower to the $1,250 to $1,300 range first.
“Gold fundamentals will find support from seasonal festival and holiday demand in the back half of 2018, while miners' continued focus on profitability and reduced capital expenditures will constrict supply,” he said.
“Seasonality will further remain a key driver for investors in Q3, which historically has been more prone to equity sell-offs,” he added. “The heightened risk of market volatility, coupled with geopolitical uncertainty leading up to U.S. midterm elections, may push gold prices to my bullish scenario of $1,400-1,450/oz by year end.”
Follow Sumit Roy on Twitter @sumitroy2