$1,600 gold ‘totally within reason’ as almost perfect storm boosts bullion to highs not seen in years

Since reaching its year-to-date low of US$1,270 in May, the price of gold has rallied by more than 20 per cent. Yuriko Nakao/Bloomberg via Getty Images

Undoubtedly, what is news is that $ 1,600 gold ‘totally within reason’, since an almost perfect storm raises bullion to levels not seen in years. That being the case, one could say that it no longer depends on the Fed’s rate cuts to continue with a surprising rebound

Certainly, the gold that is now trading above the US $ 1,500 for the first time in six years is in the midst of an almost perfect storm that no longer makes it dependent on interest rate cuts to continue its surprising recovery.

In this way, it is appropriate to say that the price of bullion has recovered by more than 20 percent. In fact, during the month of June, gold exceeded a technical level of US $ 1,400 and managed to maintain this level after not doing so several times in the past. Following the well-known growing commercial tensions between the United States and China, and what many predict will be two successive cuts in interest rates by the Federal Reserve of the United States.

True unpredictability

For his part, Andrew Kaip, who is BMO’s precious metals analyst, said the $ 1,600 is now “totally within reason”.

Likewise, affirm that gold generally moves in the opposite direction of interest rates and another cut in September would probably lead to another jump in gold prices. However, if the Fed does not announce a cut when a price is already being applied in the market, investors could panic and look towards the safe haven.

It is undoubtedly established as an extremely difficult task for analysts such as Kaip to fix a ceiling on gold prices at this time due to the unpredictability of the US-China trade war. In fact, the last boost to gold prices came on Friday, almost immediately after US President Donald Trump questioned whether Fed Chairman Jerome Powell was a greater enemy than the president of China, Xi Jinping, in a series of tweets in which he also “ordered” US companies to stop doing business with China. Only on Friday, gold prices soared by more than two percent.

Consequently, there are those who assure that commercial tensions are the reason why CIBC is optimistic about the precious metal.

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Source: Victor Ferreira | Financial Post