The Australian bank, Westpac this week revised its gold forecast in light of continuing economic and political fireworks on the world stage. The bank lifted its forecast for gold. Its analysts now expect to see gold ending the current year holding steady above the psychologically important $1500 marker at $1510. They expect the precious metal to then hit a $1520 level by June of 2020.
The bank’s upward revision was quite pronounced, spiking up from its earlier projection of $1450. In its longer term forecast, Westpac says it expects to see gold achieving $1535 by December 2021.
Fuelling this upward revision is an overarching climate of risk aversion and widespread monetary policy easing.
The commodity update said, “The main upward revision was gold, from US$1,450/oz to US$1,510/oz for end 2019 and from US$1,379 at end 2020 to US$1,480/oz, as a sustained risk aversion profile unfolds with the trade war overlaid with a global monetary expansion…
“Many are hopeful that an improvement in relations between the U.S. and China will emerge following the mid-October talks. We are sceptical, with both parties remaining diametrically opposed on key sticking points, including intellectual property. Meanwhile, a number of other geopolitical uncertainties continue to persist (Brexit, Trump impeachment calls, Hong Kong etc.)
“In the past week, market pricing for an October cut has moved closer to our view as analysts responded to downside surprises on key indicators suggesting that the U.S. economy is losing momentum. The global manufacturing recession appears to have spread to the U.S., the manufacturing ISM slumping to a decade low. There are also signs that this weakness is impacting the broader economy as evident by the non-manufacturing ISM moderating to a three-year low.”
The bank also points out that central bank activity favours gold and, it expects four more rides of interest rate cuts from the Federal Reserve.
If you’re worried that the upward forecast means you may have missed an opportunity to buy now, fear not. The bank’s commodity updates expects peaks and troughs despite the steady upward gains will be interspersed with dips too.