As gold prices sink to worst levels of year, Standard Chartered predicts a test of 2018 highs
With gold prices sinking to 2019′s lowest level last Thursday, Standard Chartered’s Suki Cooper believes they’re closing in on oversold territory.
One of her key assumptions: The Federal Reserve keeps its interest rate hike policy on hold through next year. It’s a scenario, Cooper suggests, the Street hasn’t been giving serious thought to yet.
“The Fed will be on hold in 2019 [and] 2020 as it prepares its tools for the next downturn which is likely to come in 2021,” the firm’s executive director of precious metals research told CNBC’s “Futures Now. ”
Investors typically view gold as safe haven asset when economic growth sputters. Plus, Cooper notes gold follows a historical pattern that leads to higher prices when the Fed puts the breaks on a hiking cycle and even went on to cut rates.
“Investor positioning and prices actually were range bound for a short while before they lifted higher say six months later,” Cooper said. “The trend that we’re seeing at the moment isn’t dissimilar to what we’ve seen in the past.”
Cooper suggests central bank buying and increasing demand from China and India will also likely to support gold prices at higher levels versus 2018.
“We think that upside is more likely to materialize as the year unfolds,” she said. “In Q4, we’re expecting prices to average $1325 because that’s when we expect the dollar to weaken and yields to start to ease as well.”
She expects the yellow metal to test last year’s closing high of $1362 an ounce in the final three months of the year.
And, her forecast gets even more bullish by 2020.
“We actually think gold prices are more likely to break upside further in 2020 averaging $1375 next year,” said Cooper.