Gold could soon hit $1,400, but downside risks remain, strategists warn

by Dramelin 9:00 AM 0 comments

However, lower bond yields and dollar weakness are also supporting gold, according to UBS strategist Join Teves.
"In addition to interest in gold as a safe-haven, other factors have also remained supportive.
yields and the dollar remain near the lows amid weaker-than-expected August employment data and the potential for the economic costs of Hurricane Harvey to weigh on gross domestic product growth," Teves said in a research note published earlier this week.
As gold is priced in U.
dollars, it is sensitive to U.
Recent data weakness is driving concerns that the Federal Reserve may delay hiking interest rates in the short term, which is weakening the dollar and supporting gold.
The dollar index, a measure of the U.
greenback against a basket of foreign currencies, is down more than 10 percent year-to-date to 91.
Buying activity is also gold supportive: long positions in gold (bets that gold prices will rise) increased by 16 percent in the week ending 29 August, while gold exchange traded funds rose by half a million ounces in September and are up 5.
33 million ounces year-to-date, according to UBS data.
But downside risks remain.
For instance, if the dollar rebounds, then gold prices would fall, warns Carsten Menke, commodities research analyst at private bank Julius Baer.
"Given the solid growth backdrop in the United States and the outlook for higher interest rates, we still expect a rebound of the U.
dollar," he said in an email on Thursday.
"Adding prevailing bullish sentiment in the futures market as well as sluggish demand in the physical market, we see more downside than upside from current levels and shift our view to cautious.
" Menke added that Julius Baer`s three-month and 12-month price targets for the yellow metal remained at $1,200 per ounce.