Saxo Bank Head of Commodity Strategy Ole Hansen believes gold and silver’s recent drop in price is temporary amid a climate ripe for higher prices.
“Precious metals, which had enjoyed a strong run-up ahead of the election, turned sharply lower after a simultaneous surge in the USD and yields forced prices through key technical levels, overwhelming a market where hedge funds had held an elevated long position for months, especially in gold,” he wrote in a note. “Overall, we see no reason to alter our bullish stance on investment metals, and at worst, we view the correction this past week as a healthy response to weeks of election-focused buying.”
Trump’s policies could benefit gold
Hansen said he doesn’t expect a new administration that works to reduce the federal deficit, which has grown to $36 trillion.
“The U.S. debt situation will likely continue to deteriorate as the Trump administration increases unfunded spending toward tax cuts, infrastructure and defense. In addition to continued demand from central banks seeking to de-dollarize their reserves, tariffs will raise inflation concerns, which should more than offset a potential slowdown in U.S. rate cuts,” he wrote.
Hansen said the $2,600 an ounce level is significant and should be watched as gold prices fall.
Oil continues move higher
Gold was one of the worst-performing commodities of the past week, eclipsed only by silver. Oil prices on the other hand rose significantly last week, leading the Bloomberg Commodity Total Return Index to a modest gain.
“While increased tariffs may take months to implement, the market nevertheless has been looking to China for additional measures to support its troubled economy,” Hansen wrote. “Given the current mix of opposing forces, oil prices are likely to stay range-bound for now with Brent and WTI in the mid-70s and low 70s for now. Upside pressures come from potential increased sanctions on Iran and Venezuela, along with geopolitical risks heightened by the Israeli conflict with Hamas and Hezbollah, and an emboldened Netanyahu following Trump’s win.”
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