RBC expects higher gold prices throughout the year 2019

New York (Jan 9)  Increased volatility in the equity market is changing gold’s relationship with the U.S. dollar, demonstrating that investors are turning to the safe-haven in fear of turbulence elsewhere, said RBC Capital Markets commodity strategist.

“It’s less about the ever stronger dollar, or ever-rallying equities, or rate hike upon rate hike. And we are now seeing gold react to a lessening of these forces,” RBC’s Christopher Louney said  n an interview. “A loosening of the macro headwinds that have pinned gold down is going to allow gold to rise above the $1,300 level in 2019.”

The U.S. dollar has fallen from its peak levels and volatility in the equity space has been rising as well, which corresponds to gold’s sustained gains since November, Louney noted. February Comex gold futures were last seen trading at $1,286.20, down 0.29% on the day.

“People are looking at the market and seeing uncertainty and volatility that is displayed in equity levels and taking a second look at gold. Maybe if they haven’t looked at it at least since mid-2018, people are warming up to the idea that it is a reasonable place to make an investment given the volatility and uncertainty unfolding elsewhere in the market,” he said.

 RBC sees higher gold prices throughout the year, with its Q1 projection standing at $1,333.

“Even if we were to undershoot that, we still think there’s continued upside from current levels,” Louney pointed out. “We are getting to see a rally materialize. While that may certainly slow, we think that ongoing market volatility will turn some investor attention towards gold and those allocations will certainly help gold on a price basis.”

Following Q1, RBC estimates for gold to average in the low to mid $1,300 for the majority of the year.

“A lot of that centers on unfolding volatility we’ve seen in equities, the changed base-case for the Fed, and lastly what we see happening in the dollar,” Louney said, noting that RBC projects two more Federal Reserve rate hikes in 2019.

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