Commerzbank still see some more upside in gold

New York (Jun 1)   Commerzbank note that robust demand in gold ETF's could be responsible for the recent rise in the yellow metal. It noted that the fall in the dollar and the recent drop in yields could have also helped the safe haven as previously the rise in yields helped offer investors another alternative. 

The German investment bank said "Gold gained by nearly 8% in May, chalking up its most pronounced monthly increase since July 2020. This was facilitated by robust ETF purchases, which totalled 49 tons according to Bloomberg. They were the first monthly inflows since January and the biggest since September 2020.".

They added "In view of the high inflation expected in the coming months and the significantly negative real interest rates as a result, demand among ETF investors should remain high, thus lending additional tailwind to gold. The current debate within the Fed about a possible reduction in bond purchases is still very much in its early stages.".

On gold, they lastly noted "If it were to take more concrete shape, causing bond yields to rise, gold would briefly come under pressure – as has been seen in past months when yields increased. However, this is unlikely to weigh on gold for any prolonged period so long as yields remain below the rate of inflation. We therefore expect the price to climb to $2,000 per troy ounce by year’s end.".

This is muchly in line with their technical department too as even before the recent price rise the team at Commerzbank projected a move higher in the yellow metal. For now, it seems that the bulls are very much in charge as gold continues to trade above $1900/oz. 

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