UOB price projections for gold
- For this final quarter of the year, USD 1,550
- Q1 2020 USD 1,600
- Q2 and Q3 of 2020 USD 1,650
UOB cite 4 key positive drivers for gold
- which are "fairly obvious"
- 1. Fed widely expected to cut rates further (reduces the opportunity cost for holding gold)
- 2. on-going steep drop in long term bond yields (also reduces the opportunity cost for holding gold)
- 3. Asia and EM central banks seen increasing their foreign reserve allocation into gold (to increase buyer demand)
- 4. strong increase in safe haven investor demand for gold due to risk aversion (to increase buyer demand)
All 4 drivers have gotten stronger as this year progressed, but "there is a growing negative"
- As gold price rallied, its net long positioning has also increased significantly towards a new record high
- This would imply that gold is ripe for profit taking if the above mentioned positive drivers dissipate
- On other hand, as long as the positive drivers remain strong and intact, such large net long positioning can remain at extreme levels for extended period of time.
