Credit Suisse: Gold Could Retest Its Record High of $1,921


Jun. 27 2019, Updated 2:38 p.m. ET

Credit Suisse is positive on gold

Credit Suisse (CS) is positive about gold prices (IAU) in 2019. Credit Suisse sees a number of macroeconomic factors supporting gold prices in 2019. These issues include ongoing geopolitical issues such as the US-China trade war, slowing global growth, and recession fears.

As reported by CNBC, in a note to clients on June 24, Credit Suisse’s global head of technical analysis, David Sneddon, said, “Bigger picture though, given the magnitude of the base, which has taken six years to form, we suspect we could even see a retest of the $1,921 record high.”

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Multiyear base to provide long-lasting rally

Sneddon believes that the precious metal has established a multiyear base, which should provide it with a “significant and long-lasting rally.” Gold has remained under $1,350 per ounce for the last five years, consolidating sideways. Recent factors such as lower interest rate expectations, a weakening US dollar, and geopolitical factors pushed gold above its long-term resistance level of $1,350 per ounce. A higher level of gold, first breaking above $1,350 and then $1,400 per ounce, sparked the wave of short covering. The fresh buying is also accompanying the short covering, leading to new highs for the precious metal.

US dollar weakening to help gold

Sneddon also maintains that there are now “more conclusive signs of the USD starting to materially weaken.” The weakness in the US dollar has been one of the major drivers of higher gold prices lately. Since gold prices are dollar-denominated, they are usually inversely related to each other. As the Fed’s dovishness has increased due to the ongoing trade tensions and weaker economic reports, the odds of a rate cut have increased. The Invesco DB US Dollar Index Bullish ETF (UUP), the largest ETF tracking the US dollar’s movements against major currencies, is down 1.6% in the last month alone. In the same period, the SPDR Gold Shares ETF (GLD) has risen 9.7%. The weakness in the US dollar is manifesting in strong gold prices.

Read Is the End of the US Dollar’s Rally the Start of Gold’s Bull Run? for a detailed discussion of the US dollar and gold.


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