Gold’s weakness is not ‘justified,’ according to investment firm
The yellow metal’s poor performance this year is not “justified” and gold prices are overdue for a rally, according to New York-based WisdomTree Investments, which forecasts gold to climb back up to $1,320 an ounce next year.
Spot gold on Kitco.com lost more than 11% in the last six months, last trading firmly below the key $1,200 an ounce level, while the December Comex gold futures were at $1,192.70, up 0.10% on the day.
“[This kind of] decline is [not] justified by the 11 basis-point rise in bond yields and 0.4% gain in the U.S. dollar. Rather, gold’s poor performance seems to have been driven by a collapse in sentiment,” said WisdomTree director Nitesh Shah.
Shah believes the argument that precious metals investors “lost faith” in the metal as a safe haven is wrong. “The fact that developed market equities remained strong during the period suggests that investors weren’t looking for a safe haven,” he said.
The current market “pessimism” around gold is “excessive,” he added. “Gold appears ripe for a short-covering rally. Our base case is for the metal to end this year close to USD1,270/oz and reach USD1,320/oz by Q3 2019,” Shah noted.
WisdomTree highlighted that even though the Federal Reserve’s plans to hike rates this and next year weighs on gold prices, much of the tightening cycle has already been priced in…