Gold price to overcome Q4 nerves, trade in $1,230-1,420 range – Sucden

The gold market will be subject to some nervousness in the fourth quarter of this year due to growing investor fears about the Federal Reserve raising rates in December, Sucden said.

Still, the broker believes the metal will ultimately pass the test, it said on Tuesday, October 18 in a quarterly report produced in partnership with Metal Bulletin.

It expects gold prices to trade in a range of $1,230-1,420 per oz over the fourth quarter of the year – the uptrend that started late in 2015 is set to continue over 2017.

Gold consolidated in the third quarter, edging less than 1% lower, bringing its year-to-date rise to 23.4%. Despite a slightly supportive macro backdrop, monetary demand slowed while jewellery demand remained weak.

“The macro environment could deteriorate in the fourth quarter because of renewed Fed hawkishness that will put the metal under episodic selling pressure,” Sucden said. “Still, we think buying pressure will eventually resume owing to gold’s increasing attractiveness in a world of negative interest rates.”

Although gold is likely to face strong headwinds in the fourth quarter, Sucden expects the uptrend that started at the end of last year to remain intact in the fourth quarter and in the whole of 2017 due to multiple factors.

First, although the Fed may lift rates once this year, Sucden thinks it will remain “behind the curve” for a long period.

The expected path of the Fed funds rate should therefore continue to flatten over the coming quarters and produce a friendly macro environment for gold, the broker added.

Second, gold is likely to remain an attractive investment in a world of negative interest rates – a third of global government bonds are trading at a negative yield, prompting investors to re-allocate funds from negative-yielding assets to non-yielding gold, it said.

Finally, central bank demand, accounting for 14% of total gold demand, is set to remain solid because reserve managers view gold as an increasingly important asset in their diversification strategies.

“The pace of monetary demand for gold should therefore remain sufficiently robust in the coming quarters to offset lacklustre demand in the jewellery sector and push gold prices higher for longer, we feel,” Sucden said.

(Editing by Mark Shaw)

 

 

 

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