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The precious metal is expected to keep shining in the next months, according to Researchers at UOB Group in the Quarterly Global Outlook.

Key Quotes

“The 4 key positive drivers for gold are now fairly obvious. First, is that the US Federal Reserve is widely expected to cut rates further. Second, is the on-going steep drop in long term bond yields. Third, is that central banks in Asia and EM countries are seen increasing their foreign reserve allocation into gold. Fourth, is the strong increase in safe haven investor demand for gold due to risk aversion. Both the first and second positive drivers reduce the opportunity cost for holding gold, while third and fourth positive drivers increase buying demand for gold. All 4 drivers have gotten stronger as the year progressed”.

“However, there is a growing negative that does not fit into this bullish outlook for gold. As gold price rallied, its net long positioning has also increased significantly towards a new record high. This would imply that gold is ripe for profit taking if the above mentioned positive drivers dissipate. On other hand, as long as the positive drivers remain strong and intact, such large net long positioning can remain at extreme levels for extended period of time. Nonetheless, this would imply that late comers to the gold rally need to pick their entry level carefully”.

“Overall, we forecast gold at USD 1,550 / oz in 4Q19, USD 1,600 / oz in 1Q20 and USD 1,650 / oz across 2Q20 and 3Q20. Spot rate is USD 1,510 / oz“.