Top gold forecaster sees bulls heading for heartbreak on Fed
NEW YORK – For top gold forecaster BNP Paribas SA, bullion bulls are up against a clear and present danger – the US Federal Reserve.
The central bank’s plan to raise interest rates again this year while potentially reducing its balance sheet is negative for the non-interest bearing asset, says Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas in London, which topped Bloomberg’s gold accuracy rankings in the second quarter. He’s among the most bearish forecasters, betting bullion will drop to $1 165 an ounce in the fourth quarter, from $1 225 on Thursday.
Gold posted its first monthly loss this year in June as indications of stable economic growth cut demand for haven assets and investors looked past geopolitical concerns, including US tensions with North Korea and conflict in the Middle East. At the same time, central banks are signaling higher borrowing costs, prompting hedge funds and other large speculators to reduce long positions in US bullion futures and options to the lowest since May. The metal is still up almost 7% this year.
Investors will face “a greater opportunity cost of holding gold” as Fed hikes drive real rates higher, Tchilinguirian said in an email, adding that BNP expects the next rate increase in December. Support from geopolitical events and hedging “are unlikely to affect our directionally negative view on gold for the year.”
The fourth quarter 2017 estimate from BNP, which was the top gold and precious metals forecaster in the three months ended December 2016, compares with the $1 230 median projection of 31 analyst estimates compiled by Bloomberg.
Should gold breach technical support in the $1 190 to $1 200 range, the price could undergo “further corrections toward the December 2016 lows,” Tchilinguirian said. The metal touched a 10-month low of $1 122.89 in December, according to data compiled by Bloomberg.
Bullion’s recent drop has been exacerbated by a rebound in the US dollar as equities surge and risk sentiment improves. Speculation that the European Central Bank will reduce monetary accommodation could also weigh on the metal, Tchilinguirian said.
Others aren’t as bearish. Gold will probably trade in a range of $1 200 to $1 300 as the metal tracks US real interest rates, according to UBS Group AG’s wealth management unit. “We like the insurance qualities for gold just from an unknown perspective at these sorts of levels,” Wayne Gordon, executive director for commodities and foreign exchange, said on July 4.
Comments
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation