In the Long-Term, Gold Could Reach $4,000 per Ounce, Says Saxo Bank

On Wednesday (April 22), Ole Hansen, Head of Commodity Strategy at Saxo Bank, presented his outlook on gold during an interview with Neils Christensen, Editor of Kitco News.

Hansen, who joined Saxo Bank in 2008, has been the Danish bank’s Head of Commodity Strategy since 2010. He is «the author of the Weekly Commodity Update, which sets out the moves in commodities, and also provides clients with commodity-related trade views under the #SaxoStrats brand», as well as «a regular contributor to both broadcast and print media including CNBC, Bloomberg, Reuters, the Wall Street Journal, the Financial Times and the Telegraph.»

Hansen was being interviewed at a time when the spot price for gold was around $1700.

Christensen started the interview by asking Hansen to comment on gold’s latets price action. Hansen said:

«Well, I think we’ve reached a little bit of a plateau here. We’re pausing because we got some conflicting news pulling this market right now.

«We know that the physical demand out of some of the major buyers in China and India is on the weak side.

«We have this recent collapse in the crude oil price, which hit this historical negative level on Monday having an impact on something like Brent Crude, which is now down to the $20 level.

Russia is counting on $40 to balance their budget. So, there is obviously a risk that they may start to sell some of their gold. So, that’s adding a little nervousness to the market.

Next, Hansen talked about how this collapse in the price of oil (due to the huge reduction in demand caused by the current COVID-19 pandemic) could affect the gold market given the risk of deflation that it poses:

«Well, the very cheap fuel prices is obviously keeping inflationary pressure at this stage under control, but I think against that if we look a bit further out, I think from a goal investment perspective, it’s not really what’s happening today or tomorrow or next month

«It’s [about] what lies ahead in six to twelve months and beyond, and I think that if you look out that far, we are basically looking entering into unknown territory.

«We have this phenomenal amount of monetization coming from the central banks, money being pumped into the system…

«We have a yield curve control in the U.S. coming in. What happens when inflation starts to pick up and yields can’t go up? Then, obviously, real yields will have to go down, and I think that has been and will continue to be one of the key drivers for gold over the coming period.»

As for his long term gold price forecast, Hansen had this to say:

«if I may copy what my boss has written in his recent pieces, basically looking for $4,000 potentially over the coming years because of this massive experiment that we are having which we thought was bad for the last ten years, which is going to get even worse in the future.

«The dollar strength is going to run out of steam. So, the debasement there is going to have an impact, and then just the whole worry about the sovereign debt… and inflation eventually taking up as well…

«So, if ever there was a time where it made sense to at least put a part of your savings into something tangible, then I think that is now.

«So $4,000 probably [is] a little bit farfetched as the world looks right now, but if you look years into the future, then that is possible because the repercussions of what we’re going through right now with the pandemic and the aftermath is going to be something that’s going to be felt for at least this generation and potentially beyond.»

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08.07.2020 15:14
Forex — Dollar Edges Higher as Virus Cases Grow

The dollar edged higher in early European trade Wednesday, with the safe haven currency in demand as a resurgence of the coronavirus in the United States cast doubt over the strength of the economic rebound.

At 3:050 AM ET (0705 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 96.873.

EUR/USD was up 0.2% at 1.1280, while USD/JPY was flat at 107.52.

There are almost 11.8 million COVID-19 cases globally as of July 8, according to Johns Hopkins University data, of which the U.S. has the highest known numbers of cases and deaths in the world.

A number of Federal Reserve officials expressed concern Tuesday that the surge in infections could adversely impact the economy just as some stimulus programmes are set to expire.

Atlanta Federal Reserve Bank President Raphael Bostic warned that the spike in the number of cases has made business owners “nervous again” and that ‘there is a real sense this might go on longer than we have planned for.”

Still, the rise in cases is not simply a matter for America. The AUD/USD pair lost 0.2% to 0.6935, with the Australian dollar weakening after the country’s second-largest city Melbourne re-imposed lockdown measures to curb the outbreak.

Elsewhere, GBP/USD gained 0.2% to 1.2559 after Prime Minister Boris Johnson said that the U.K. remains committed to working hard to find an agreement over trade with the EU. Chancellor of the Exchequer Rishi Sunak is due to announce details of the country’s latest fiscal stimulus package later Wednesday.

Sterling has gained around 0.6% this week against the dollar and 0.4% against the euro, but still remains one of the weakest G7 currencies as doubts still remain as to whether a trade deal will be signed by the end of the year.

Additionally, skepticism exists that a proposal by some of Donald Trump’s advisers to undermine Hong Kong’s currency peg would come to fruition, as such a move would be difficult to implement and risk hurting U.S. interests as much as it would punish China.

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08.07.2020 13:12
Risk aversion sends gold higher, oil downwards

Oil retreats slightly on risk aversion
With one eye on the equity markets overnight, oil markets mirrored the response of currency markets, giving up some of their recent gains and slipping into range trading mode. Brent crude fell slightly by 0.70% to 42.90 a barrel. WTI eased by 0.70% to USD 40.50 a barrel.
Both contracts are unchanged this morning in Asia, with critical resistance on Brent crude at USD 44.00 a barrel, and on WTI at USD 42.00 a barrel. Only a fall below USD 40.00 a barrel for Brent crude, or USD 37.00 a barrel for WTI, would suggest that the rally in oil prices has run its course.
Oil prices continue to remain balanced between Covid-19 induced growth concerns, and recovery expectations in Asia and Europe. Oil’s downside is likely to be limited unless the US situation deteriorates dramatically. OPEC+ discipline is high, and the grouping will no doubt find the willingness to extend the headline cuts if the situation calls for it.

Excitement builds for gold longs as USD 1800.00 approaches
Anticipation is building in the gold fraternity, with Covid-19 concerns giving a haven boost to prices overnight. Gold rose 0.60% to USD 1795.00 an ounce, having tested USD 1797.00 an ounce earlier in the session. Gold’s grind higher is remorseless and pleasingly, appears to have detached itself from negative equity price action for now.
The USD 1800.00 an ounce region will be a tough nut to crack though. It capped gold’s advance multiple times from 2011 to 2012. I do not doubt that there will be substantial option related offers ahead of it to defend USD 1800.00 strikes. Nevertheless, gold is girding itself for the long-awaited assault on this critical resistance level. Gold had support at USD 1775.00 an ounce. Only a daily close below here would delay proceedings. Should USD 1800.00 an ounce give way, gold is likely to move quickly to the USD 1820-1830 zone, driven by stop loss and algorithmic buying.
Gold is unchanged in Asia today in yet another moribund session. It will probably be left to the New York market to get the job done.

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07.07.2020 12:23
Oil prices fall on demand concerns from U.S. coronavirus case surge

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U.S. West Texas Intermediate (WTI) crude (CLc1) futures fell 17 cents, or 0.4%, to $40.46 a barrel at 0340 GMT, after earlier rising to as high as $40.79.

Brent crude (LCOc1) futures declined by 19 cents, or 0.4%, to $42.91, after hitting an intraday high of $43.19.

With 16 U.S. states reporting record increases in new COVID-19 case in the first five days of July, according to a Reuters tally, there is mounting concern that public health measures to limit the virus spread will curb fuel demand.

Florida is re-introducing some limits on economic reopenings to grapple with rising cases. California and Texas, two of the most populous and economically crucial U.S. states, are also reporting high infection rates as a percentage of diagnostic tests conducted over the past week.

«The potential for demand destruction as lockdown re-instatement looks more likely are combining with concerns about OPEC+ discipline to weigh on oil prices,» said CMC Markets’s Chief Market Strategist Michael McCarthy in Sydney in an email.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, collectively known as OPEC+, are lowering output by 9.7 million barrels per day (bpd) for a third month in July.

However, those cuts are set to taper to 7.7 million bpd starting next month, adding supply at the same time U.S. fuel demand, especially for gasoline, remains impacted by the COVID-19 outbreak.

«Summer driving demand in the U.S. is low, keeping gasoline demand subdued, and a reintroduction of lockdowns is a major headwind,» ANZ said in a note.

Data from the American Petroleum Institute industry group later on Tuesday and the U.S. Energy Information Administration on Wednesday are expected to show a 100,000 barrel rise in gasoline stockpiles, six analysts polled by Reuters estimated.

The U.S. crude market faces some uncertainties from a court decision on Monday ordering the shutdown of the Dakota Access pipeline, the biggest artery transporting crude oil from North Dakota’s Bakken shale basin to Midwest and Gulf Coast regions, over environmental concerns.

Market sources in the Bakken said the closure of the 570,000-bpd pipeline, while a thorough environmental impact statement is completed, will likely divert some oil flows to transportation by rail.

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