Gold Consolidating Gains

Despite the overnight pullback, it’s been another solid week for precious metal investors, with gold in USD trading at $1,267 per troy ounce. In Australian dollars, prices are closer to $1,735 per troy ounce, with the local currency having fallen below USD $0.73.

The fall in the currency represents a dramatic change in the space of just a few weeks, owing to the RBA rate cut from early May, as well as a dramatic repricing of interest rate futures, which suggests we could hit Xmas 2016 with a cash rate closer to 1% than 2%.

With a share-market that is still oscillating between 5,000 and 5,500 points – it’s no surprise to see precious metals supported, with rising demand in Australia very much reflective of a global trend. This much was evidenced in the latest data released by the World Gold Council overnight, which suggested gold demand had risen 21% year on year to the end of Q1 2016, driven by a surge in Western investment demand.

Whilst physical flows have been strong, a large portion of this has also come through gold ETFs, which is seen best in the chart below, which shows quarterly inflows and outflows going back to 2009. 

The strong performance of gold in Q1 2016 has led to a raft of analysts upgrading their gold price forecasts for 2016, with Goldman Sachs amongst those lifting their ‘base-case’ for the metal. After previously forecasting that the metal would fall to USD $1,000 per troy ounce this year, Goldmans now see the metal finishing the year closer to USD $1,150 per troy ounce, whilst Barnabas Gan, economist for OCBC has also upgraded his forecast, now seeing the metal end the year at USD $1,200oz.

With hedge funds fairly bullish right now, we wouldn’t at all be surprised to see a period of consolidation for the metal right now, though we think local investors will continue to be cushioned from any major downside risk due to the weakness in the Australian dollar.

Podcast with Business Insider
Yesterday, I was invited to do a podcast with Paul Colgan and David Scutt from Business Insider. We discussed a number of topics relevant to Australian investors, including the outlook for interest rates, the Australian dollar and Australian property.

We also spent some time discussing the outlook for gold, and the role physical precious metals can play in an investment portfolio today.

The interview goes for about 30 minutes, and covers the vast majority of our views on the Aussie economy, price targets for gold in Australian dollars, as well as the three key reasons to own gold today, despite the low official inflation rates we see in the vast majority of the developed world.

Click here to listen to the Podcast with Business Insider

The topics discussed we will be discussing at our upcoming investment conference too, “The new bull market in precious metals” which will be held on the 26th of July at the Ivy Ballroom.

Click here to book a ticket to the Investor Conference

Until next week

Jordan Eliseo

Disclaimer

This publication is for educational purposes only and should not be considered either general or personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, and past performance is not necessarily indicative of future performance. Any prices, quotes, or statistics included have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.