Gold to potentially make an extension towards $2,500/oz – Saxo Bank (Commodity:XAUUSD:CUR)

Saxo Bank expects the prices of gold to potentially make an extension towards $2,500 an ounce later in the year, after having clocked a record high of $2,304.09 on Thursday, on expectations for lower U.S. interest rates this year.

The brokerage sees silver moving towards $30, a level not seen since the February 2021 high.

“Gold remains a buy-on-dip market, defying the normal negative impact of dollar and yield strength,” Ole Hansen, Head of Commodity Strategy at Saxo Bank said, adding that, consolidation may follow in the short-term before rate cuts potentially triggers a second leg higher.

According to the brokerage, gold reached the $2,300 target, without three important drivers, namely rate cuts, where expectations have fallen from above seven at the start of the year to less than three currently.

The brokerage had envisaged a weaker dollar, and lower real yields to result in a pickup in demand for ETFs from real money managers. While neither of these has yet materialized, brokerage notes, gold has instead been driven higher by hedge funds, “or speculators enjoying the strong momentum that has been set in motion by strong demand from investors around the world responding to heightened geopolitical tensions and debt-financed growth.”

Gold prices registered a second-straight month of gain in March, rising over 10%, led by higher inflationary pressures and rising geopolitical risks amid the turmoil in the Middle East.

Performance in gold, silver and dollar in the past one month:

The gold-silver ratio has meanwhile slumped from above 90 ounces of silver to one ounce of gold to the current 84.7, a move that highlights silver’s ability to rally hard when it receives dual support from both gold and copper, Saxo Bank’s Hansen added.

Best-performing gold stocks by one-year performance: Harmony Gold Mining (HMY) +90.47%, Compania de Minas Buenaventura (BVN) + 93.53%, New Gold (NGD) +49.14%, Eldorado Gold (EGO) + 35.89%, Kinross Gold (KGC) + 24.36%, Iamgold (IAG) +22.87%, Alamos Gold (AGI) +11.87%.

At the same time, outflows from global physically backed gold ETFs continued for the ninth consecutive month, shedding $2.9bn in February, according to the World Gold Council.

Gold ETFs: (NYSEARCA:GLD), (NYSEARCA:GDX), (NYSEARCA:GDXJ), (IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ), (SLV), (PSLV), (SLVP), (SIVR), (SIL), (SILJ)

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