Gold prices, which touched an all-time high of $1,944.66 an ounce on Monday afternoon, will see a correction in the near-term and could hit $1,700, before bouncing back again to $2,500 in the next few years, industry analysts said.
Since gold is expected to see a correction in the coming weeks, consumers should sell now when the price is nearly peaking, and then buy it back when it touches $1,700 or $1,750.
"There could be a correction of 12-13 per cent in gold, and it may be heading towards $1,700 an ounce. We have seen gold go from $1,450 straight to $1,940 non-stop. There may be a little bit less jewellery buying, but there is plenty of buying of gold bars from exchange traded funds (ETFs). During the Dubai Shopping Festival, we predicted gold at $1,800 and we now expect to touch $19,00 in Q3; by Q4 it could be $2,000 to $2,100," said Tawhid Abdullah, chairman of the Dubai Gold and Jewellery Group (DGJG).
He projected that gold will touch $2,200 and then $2,500 in the coming few years, following the post-correction phase, which is around 20-25 per cent higher from the current value.
In Dubai, retail gold jewellery for 24-karat was Dh234.0 and 22-karat stood at Dh219.75 plus five per cent value-added tax (VAT).
"We have seen interest rates dropping dramatically in the US, so buying commodity is the biggest positive factor in today's price. The second factor is money is being printed in trillions in Asia, Europe, and the US. Thirdly, the vulnerability of the tussle between the two largest economies in the world has created uncertainty," Abdullah said during a webinar hosted by DGJG.
Ahmed Alkhaja, CEO of Dubai Festivals and Retail Establishment - Dubai Tourism; Abdallah Al Ameeri, director of raffles and retail promotions at Dubai Tourism; and Laila Mohammed Suhail, board member and chairperson for marketing at Dubai Gold and Jewellery Group, also addressed the webinar.
The yellow metal has been rallying over the last few weeks. It has risen over 7.3 per cent in the past 30 days, 21.2 per cent in last six months and nearly 34 per cent in the past one year.
Carsten Menke, head of next generation research, Julius Baer, expects ongoing momentum could push gold prices even higher in the short-term, but he doesn't believe such lofty levels are justified in the medium to longer term, assuming an improving economic environment.
"All the pieces seem to be falling into place at the moment, with a weaker US dollar adding to ever more negative US real bond yields, an out-of-control increase in coronavirus cases in the US and renewed rising tensions with China. As a result, and because of the momentum that has been building in the gold market, investment demand stayed strong," said Menke.
Holdings of physically backed gold products have risen by 160 tonnes this month, taking the year-to-date total to almost 900 tonnes.
"While we have pointed to short-term price risks being skewed to the upside, we have been too cautious in our assessment, in particular with regard to the momentum that has been building over the past couple of weeks, luring technical traders and trend followers into the market. As the mood is unlikely to turn amid favourable fundamentals and reflecting our lower US dollar forecasts, we lift our three and 12-month targets to $1,900 and $1,750 per ounce. While momentum could push prices even higher in the short-term, we do not believe such lofty levels are fundamentally justified. Medium to longer term, we remain of the opinion that an improving economic environment should eventually weigh on investment demand, leading prices somewhat lower," added Menke.
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