One market veteran said geopolitical and structural factors have gold prices expected to hit $2,600 an ounce within a year.
Precious metals have hit record highs in succession this year, with spot gold exceeding $2,300 on Thursday before falling slightly. It was trading around $2,278 an ounce earlier on Friday.
The reasons behind its climb — and how much it could rise in the short to medium term — is a hot topic among investors, especially as stock market gains remain strong.
Juerg Kiener, chief investment officer of Swiss Asia Capital, said on CNBC’s “Street Signs Asia” on Wednesday that his analysis of gold’s forward curve “looks great.”
“If you look at the one-year forward curve, it’s about 26 ($2,600). I think we could be quick because we took out 23 ($2,300) and it has a lot of pent-up demand,” he said.
He added that the inventory collapse in the gold market was putting “many derivatives structures at risk.”
“It could also put a lot of the structures in the market that are involved in gold trading at risk because (traders) may not be able to cover (their short positions). If I say 26 is just a forward curve to me, then if we Do a short squeeze and the numbers will be even higher.”
A short squeeze is when an asset’s price rises so sharply that those with a short position (betting that the price will fall) are forced to buy the asset to prevent further losses, often pushing the price even higher.
Keener also pointed to geopolitics, the shift to a “multipolar world” and changes in the structure of international trade as reasons why he is optimistic about gold prices. Another reason, he added, is that governments “print money like there’s no tomorrow.”
Gold is often viewed as a so-called safe-haven asset and also as a potential inflation hedge.
Amid the wars in Gaza and Ukraine, the upcoming U.S. election and the potential for recession in major economies, geopolitics is seen by some analysts as a medium-term bullish basis for gold. Another often mentioned factor is the possibility of the Federal Reserve cutting interest rates, with three rate cuts expected this year. Lower borrowing costs tend to increase gold’s appeal as investors shift away from fixed-income assets such as bonds.
“A lot of precious metals are leaving the West,” he said, adding that demand for precious metals in Asia and the broader BRIC countries was “really turning” to growth.
Chinese investors and households are showing Gold demand increases Stocks plunged in 2023 amid continued turmoil in the country’s real estate market, according to the World Gold Council.
Central banks also increased their gold reserves last year, supporting prices.
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