Wednesday, July 13, 2016

Gold rally to continue as higher prices will spark new buyers to jump in the already tight market

A new report out on July 12 suggests that the ongoing gold rally will not only sustain itself going forward, but will spark much higher prices as new buyers come into the already tight market.

Analysts from both UBS and Credit Suisse are in agreement that the gold bull market has barely begun to move because the amount of investors and buyers have been very limited so far.  And they assess that once the price breaks through a certain point, it will spark an unlimited amount of buyers who see gold as a much more secure bet in today's environment of negative interest rates and helicopter money.

Gold Rebound Linked to Fall in Interest Rates
It’s been a stellar six months for gold investors. The yellow metal has surged 28 percent year-to-date, its best first half of the year since 1974, and there are signs that the rally is just getting started. That’s the assessment of analysts from UBS and Credit Suisse, who see gold entering a new bull run. According to UBS analyst Joni Teves, gold could climb to $1,400 an ounce in the short term on macroeconomic uncertainty, dovish monetary policy and lower yields. 
“These factors,” Teves writes, “justify strategic gold allocations across different types of investors” and should encourage hesitant investors to participate. 
Joining UBS in forecasting further gains is Credit Suisse, which sees gold reaching $1,500 by as early as the start of next year. As Kitco reports, Credit Suisse analyst Michael Slifirski writes that “the surprise Brexit vote has solidified and intensified macro and political uncertainty and extended the time frame for a negative real rate environment in the U.S. and potentially abroad.” 
This is precisely what I told BNN’s Paul Bagnell this week, using Canada as an example. The Canadian 10-year yield is sitting just below 1 percent, while inflation in May came in at 1.5 percent. When we subtract the latter from the former, we get a real rate of negative 0.5 percent—meaning inflation is eating your lunch. Like negative bond yields, negative real rates have in the past accelerated momentum in gold’s Fear Trade. - Forbes


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