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OPINION

Big Banks Continue to Support Gold

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Most global mega-banks are still supporting gold as part of their overall investment strategy. In some cases, they are predicting higher prices in the range of $1,400 to $1,500. Switzerland’s Credit Suisse sees gold reaching $1,500 by the beginning of 2017. Credit Suisse analyst Michael Slifirski cites “macro and political uncertainty” as well as “a negative real rate environment in the U.S. and potentially abroad.”

Another Swiss bank, UBS, sees gold rising to $1,400 soon. UBS analyst Joni Teves says that gold could reach $1,400 due to a similar list of concerns – economic uncertainty, declining bond yields and negative interest rates. “These factors,” Teves wrote, “justify strategic gold allocations across different types of investors.” She added that the view that “gold has now entered the early stages of the next bull run is becoming a common theme among our conversations with various market participants.”

Canada’s RBC Capital Management predicts $1,500 gold in 2017, citing elevated geopolitical uncertainty and higher “systemic” risk related to declining real interest rates. RBC analysts said, “We believe the economic environment is more favorable for gold with a dovish outlook by the U.S. Fed, declining (U.S. dollar) real rates, global central bankers looking to negative real rates for economic stimulus and steady fundamental demand for physical gold,” adding that “Our technical outlook suggests that the next gold bull market is underway, and any weakness is viewed as a buying opportunity.”

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In addition, a global research team at Bank of America Merrill Lynch reinforced their optimism for gold by calling for a rise of 10% between now and the end of next year with a target price of $1,500.

Negative Interest Rates Support Gold

Gold gave up some of its post-Brexit gains last week, as the financial markets recovered from the shock of their June 23 vote to leave the European Union (EU) – a process which should take over two years to unravel. Still, we see negative interest rates prevailing in Japan and most of Europe, giving gold a big advantage over cash in Asian and European markets. Meanwhile, holdings in the SPDR gold ETF (GLD) fell a bit after taking in a whopping $12.2 billion in shareholder purchases in the first half of 2016.

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