Morgan Stanley raised their price forecast for gold on Monday night in a note to customers after the metal hit six month highs. The $MS rationale is much like Goldman in March, higher ETF inflows, geopolitical risk, weaker U.S. dollar and negative real interest rates in Europe.
Morgan Stanley raised their price forecast for gold on Monday night in a note to customers after the metal hit six month highs. The $MS rationale is much like Goldman in March, higher ETF inflows, geopolitical risk, weaker U.S. dollar and negative real interest rates in Europe.
Morgan Stanley’s Commodity Strategist Susan Bates Rates Gold No. 1 Commodity Pick.
“Morgan Stanley’s forecasts of falling real rates and a bearish US dollar outlook, against an uncertain macroeconomic outlook, should lend significant upside to gold’s price through 2H19 and into 1H20,” said Bates in a note on Monday.
- Real yields close to zero would reduce demand for yielding USD assets
- Could increase demand for gold
- Negative territory could generate considerable further upside for gold’s price
Gold price forecast Average
USD1435 in H2 of 2019 Average USD1,338 2020
Gold Hits 6 Year High
Gold futures hit a high of $1,442.9 on Tuesday, its highest level since the May 2013 high of $1,444.9. Gold is up more than 8% so far this month, on pace for its best monthly performance since 2016. Oil has risen a similar amount with Iranian tensions.
Gold has risen rapidly since Federal Reserve chair Jerome Powell said at the most recent FOMC it would “act as appropriate” to keep the current economic expansion going. Powell’s dovish comments increased the odds of the Fed cutting rates in July and saw risk assets prices rise with the S&P 500 and Dow Jones Industrial Average rising to all time highs. The US dollar fell on the news, meaning the price in dollars for gold rose. The US dollar hit its lowest level since March on Monday against the dollar index (a basket of currencies).
Goldman Sachs Forecast in March on Gold Surpassed
Goldman Sachs New Gold forecasts raised up by USD 25
- 3 month 1350
- 6 month 1400
- 12 month 1450
Goldman Sachs New Silver forecasts raised up by US 25 cents
- 3 month 16.50
- 6 month 17.00
- 12 month 17.50
Goldman Sachs Rationale
- Low and falling US unemployment rate expected to keep late-cycle worries elevated which is supportive of ETF inflows
- Low European growth with negative real rates likely to further boost European ETF purchases
- Elevated geopolitical tensions
- Lower pressure on emerging currencies should help keep central bank gold purchases at same level as 2018
- Weaker US dollar
- Acceleration in GDP growth are expected to boost emerging market U.S. dollar purchasing power and flow on gold demand
Source: Goldman Sachs. Morgan Stanley
From The TradersCommunity News Desk