Why Do Analysts Think Gold’s Sell-Off Is Overdone?



Analysts think gold is oversold

According to a Reuters poll of 35 analysts and traders, the average gold price (GLD(IAU) forecast for 2018 and 2019 is $1,301 and $1,325 per ounce, respectively. This new consensus forecast is lower than the previous forecast of $1,334 and 1,352 per ounce, respectively, which was conducted three months ago. 

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Estimates revised lower

Heavy losses suffered by gold prices in the second quarter led most of the analysts to lower their price estimates for the precious metal. However, most of the analysts believe that the current sell-off in gold (SGOL)(GDX) is overdone.

Analysts’ views

ICBC Standard Bank Plc. believes that gold prices should climb to $1,300 per ounce by December. The firm believes that gold prices are expected to average $1,260 per ounce in the third quarter. The bank believed that in the final three months of the year, prices should rise further as interest rate hikes are priced in and physical demand emerges.

According to GFMS analyst Rhona O’Connell, “We do expect gold to rebound towards $1,300, although whether it has the legs to push convincingly through that level has to be doubtful in the short term at least.”

Julius Baer analyst Carsten Menke said, “Medium to longer-term upside should materialise once growth and inflation concerns creep into financial markets, reviving safe-haven demand.”

According to Metal Bulletin precious metals analyst Boris Mikanikrezai, “At the present juncture, sentiment in the gold market looks excessively bearish, which is unsustainable.” He added, “In the second half of the year, I expect a strong rally in gold prices and gold-mining equities as the macro backdrop for the precious metals complex should prove more positive.”


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