Although gold has been unable to hold recent gains above $1,300 an ounce, one bank isn’t ready to give up on precious-metals uptrend just yet.
In her latest precious-metals report Thursday, Georgette Boele, coordinator of foreign exchange and precious metals strategy at ABN AMRO, said that the metal’s technical outlook supports higher prices.
“Despite the recent sharp decline in prices, prices are still above the 200-day moving average at around $1,250 per ounce,” Boele said. “We are confident that prices will stay above this level. It is possible that prices drop towards this level and test it, but this would be an opportunity to position for higher gold prices.”
The comments come as gold prices see significant selling pressure. April gold furures last traded at $1,295.30 an ounce, down 1% on the day.
Boele said that her firm is maintaining its year-end target for gold prices to rally to $1,400 an ounce.
However, she added that the market will be susceptible to lingering strength in the U.S. dollar and a spike in U.S. bond yields.
“It is likely that in the near-term, the US dollar will be more resilient and therefore gold prices are unlikely to take off and break above the key resistance area at $1,365-1,375 per ounce,” she said.
Ultimately, Boele said that the U.S. dollar will be unable to maintain its current momentum as the Federal Reserve and other central banks look to loosen monetary policy this year.
Finally, ABM AMRO also sees potential for gold as the Chinese government looks to stimulate its economy and support its wavering currency.
“We think that the Chinese authorities will continue to take measures to support the economy, albeit less aggressive than in the past. This and a possible U.S.-China trade deal will support the yuan and gold prices,” she said.
Although Boele is unabashedly bullish on gold, she is a little bit more reserved on silver. Although higher gold prices will also pull silver higher, the metal could struggle because of weak industrial demand, particularly as the U.S. economy is expected to see lower economic growth.
“We think that in the near-term, there is less upside potential in silver prices given the less favorable cyclical outlook. However, we continue to expect higher silver prices later in the year,” she said.