Top Forecaster Says Gold May Recover ‘Shine’ on Global Risks

  • U.S. presidential election and Brexit talks to spur haven need
  • Rising shale oil production in U.S. may curb crude price surge

Currie: Gold Trades Lock-Step Against Real Interest Rates

Gold’s worst plunge in 14 months may yet reverse.

Looming risks from the U.S. presidential election in November to Britain starting talks to leave the European Union next year may boost its role as a haven, said Barnabas Gan, an economist at Oversea-Chinese Banking Corp. in Singapore. Increasing shale oil output in the U.S. is also likely to cool the surge in crude prices, curbing inflation, he said.

“As quickly as gold fell, as quickly gold could rally back,” Gan said in a report received Wednesday. “Weak inflationary pressures may once again lift gold prices back to their previous shine.” He was the most accurate forecaster of the metal in the third quarter, according to data compiled by Bloomberg.

Bullion slumped Tuesday on speculation that the period of easy monetary policy is ending. The European Central Bank was said to be building an informal consensus to wind down bond purchases gradually, while Federal Reserve officials called this week for higher U.S. borrowing costs amid signs of an improving economy. Oil prices have also been rising, stoking inflation worries and boosting the odds of a rate hike.

Spot bullion added 0.4 percent to $1,273.80 an ounce by 11:08 a.m. in London Wednesday, according to Bloomberg generic pricing. The metal lost 3.3 percent a day earlier, the most since July 2015, and is trading at levels last seen before the result of the British vote to leave the EU on June 23.

Investor Holdings

Fed Bank of Richmond President Jeffrey Lacker urged the central bank Tuesday to tighten policy to stem an increase in inflation, while Fed Bank of Cleveland President Loretta Mester said Monday the economy is ripe for a rate increase. Oil has soared 11 percent since the Organization of Petroleum Exporting Countries agreed last week to cut production for the first time in eight years.

Little evidence has emerged of investors cutting holdings in exchange-traded funds. Assets climbed 3.1 metric tons to 2,036.5 tons Tuesday to hold near the highest level since 2013, data compiled by Bloomberg show.

Some further downward pressure is still expected in the near term from an eventual victory for Democrat Hillary Clinton in the presidential poll on Nov. 8, which would price the risk of dramatic policy uncertainty under Donald Trump out of the market, according to BMI Research. Over the long term, low real interest rates would ensure precious metals remain an attractive investment, it said in a report dated Oct. 4. Bullion may average $1,400 next year, BMI forecasts.

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