Geopolitical and structural factors have put gold on track to hit $2,600 per ounce within a year, according to a market veteran.
The precious metal has hit successive record highs this year, including another on Thursday when spot gold broke above $2,300 before easing slightly. At the start of Friday, it was trading at around $2278 per ounce.
The reasons behind its rise – and how much higher it can go in the short and medium term – are hot topics among investors, especially as stock market gains remain robust.
Juerg Kiener, chief investment officer at Swiss Asia Capital, told CNBC’s “Street Signs Asia” programme on Wednesday 03.04 that his analysis of the gold futures curve “looks fantastic”.
“If you look at our future curve for one year, it’s about 26 [$2,600]. If you look at our future curve for a year, it’s around 26 [$2,600]. I think we can be very quick, because we’ve taken out 23 [$2,300], there’s a lot of pent-up demand,” he said.
He added that the collapse of stocks on the gold market is putting “a lot of derivatives structures at risk”.
“It probably also puts at risk a lot of structures that are in the market playing gold, because [operators] may not be able to cover [their short positions]. And if I say that 26 is, for me, just a forward curve, in the event of a short squeeze, the numbers will go up a lot more.”
A short squeeze occurs when the price of an asset rises sharply and the holders of short positions – who were betting on falling prices – are forced to buy the asset to avoid further losses, which usually pushes the price even higher.
Kiener also cited geopolitics, the shift to a “multipolar world” and changing international trade structures as reasons for his optimisation of the gold price. Another reason is the fact that governments “print money like there’s no tomorrow,” he added.
Gold is usually considered a safe-haven asset and also a potential hedge against inflation.
Geopolitics has been cited by several analysts as the basis of a medium-term bullish argument for gold, between the wars in Gaza and Ukraine, the upcoming elections in the US and the possibility of recession in the major economies. Another commonly cited factor is the likelihood of interest rate cuts by the US Federal Reserve, three of which are expected this year. Lower borrowing costs tend to increase interest in gold as investors move away from fixed-income assets such as bonds.
“We have a massive flow of precious metals coming out of the West,” he said, adding that there has been a “real shift” towards growth in demand for precious metals in Asia and the BRIC countries in general.
Chinese investors and households showed increased demand for gold in 2023, according to the World Gold Council, as the country’s property market remained in turmoil and stock markets fell.
Central banks have also increased their gold reserves over the past year, supporting prices.
O.Económico
