Analyzing Standard Chartered’s Bullish Gold Outlook

Constructive on gold’s price outlook

Standard Chartered precious metals analyst Suki Cooper is very positive about gold’s price outlook. As reported by CNBC, she said, “There’s a lot more interest in gold on a widespread basis. It’s not just tactical investors or ETF holders. it’s broad based.” She also highlighted the inflows into gold-backed ETFs. Gold-backed ETFs, including the SPDR Gold Shares ETF (GLD) and the iShares Gold Trust ETF (IAU), attracted 32.1 tons of gold inflows for the week that ended on June 21, the largest amount since July 2016. Cooper expects a high of $1,440 per ounce for gold prices in 2019.

Buying by central banks

One of the major factors, according to Cooper, helping gold prices rise is the buying of gold by central banks. As we highlighted in Central Banks Purchased the Most Gold in 50 Years in 2018, according to the World Gold Council, annual gold demand increased 4% in 2018—the highest amount of gold buying by the central bank in the last 50 years. Central banks were on a gold-buying spree in 2018. In 2018, central banks bought 651.5 tons of gold—the second-highest total on record.

Standard Chartered increases gold exposure

Standard Chartered has made a shift in its portfolio to increase its exposure to gold and emerging market (EEM) currencies. One major factor contributing to its increased gold exposure is also the collapse in global interest rates since November 2018. The negative-yielding debt is up by 65%–70% since October 2018, which increases the prospects of a significant gold rally, contributing to its bullish view.

Gold and miners overbought?

After increasing consistently for the last few days, gold prices may be entering overbought territory. Based on their 14-day RSI (relative strength index) scores, The SPDR Gold Shares and the VanEck Vectors Gold Miners ETF (GDX) look overbought with values of 84.6 and 88, respectively. Miners Barrick Gold (GOLD) and Agnico Eagle Mines (AEM) have RSI scores of 96.7 and 88.7, respectively. An RSI score above 70 suggests that an asset is overbought and that prices could pull back slightly in the near term. Some investors may want to take the opportunity to enter gold, as prices are low.

For more on gold’s outlook and price drivers, read Gold Breaches $1,400: What’s the Next Stop?