Gold to trade above $2000 by year end: Standard Bank
Precious metal gold is trading low since quite some time as investors have turned away from safe-havens, expecting the US Federal Reserve to announce further monetary easing (QE3) when it meets on September 20. However, some experts still believe that this is the best time to go for gold as it may become more expensive later.Speaking to CNBC-TV18′s Latha Venkatesh, Walter de Wet, head of commodities research, Standard Bank, said that demand for valued metals like gold and silver is still high compared to industrial metals like copper, aluminum and zinc. He feels that gold will trade above USD 2000 per ounce, while silver would trade around USD 45 per ounce before the end of the year.
Q: You are bearish on metals due to the situation not just in the US but also in China. Can you explain your rationale with respect to base metals in particular and precious metals as well?
A: Currently, demand for precious metals like gold and silver is high in Asia, South East Asia, India and China. However, for industrial metals like copper, aluminum and zinc, there is no substantial demand coming through at this stage. So, outlook for metals depends on whether you look at precious metals or base metals.
Q: What are your levels for copper, aluminium, gold and silver?
A: There is more downside for copper at this stage. It is trading at USD 8,500. We could trade aluminum at as low as USD 2,200-2,300; it is currently at around USD 2,400. If we go into recession in the US and Europe, copper and aluminum could trade as low as USD 7500 and USD 1800, respectively.
Gold will trade above USD 2000 per ounce and silver would trade around USD 45 per ounce before the end of the year. If we go into recession, those levels may move up to around USD 2200 per ounce either at the end of the year or earlier next year. For silver, we would be close to USD 50 per ounce.
Q: What about steel? How is the demand situation currently and what are the levels that you expected in terms of global steel prices?
A: Currently, with high iron ore prices, steel prices have also gone fairly high. We have seen decent demand coming through, however, in the current environment, where we have very sluggish growth in the US and Europe, we believe that even iron ore prices and steel prices could come off slightly towards the end of the year.
Q: Focusing one of the near term triggers, what are the chances of QE3 announcement? And if that happens and liquidity does improve in the market, what sort of impact do you think it is going to have on metals globally?
A: We are not going to see QE this year. There is a possibility of that but it’s not our base case. If we see QE3, the biggest impact would be on gold, silver and platinum, these metals will benefit. If you look at commodities in general, QE3 should positively affect all the commodities.
Q: Do you track crude and if you do, then what is the range you are working with for Nymex and Brent?
A: If we go into recession, we would not be surprised to see both WTI and Brent around USD 70 a barrel. But that’s not our base case. We think that we are not going into recession although growth is fairly sluggish. As a result, Brent is going to struggle to remain above USD 115 a barrel and going to trade between USD 106-115 a barrel for the rest of the year.
Brent should average about USD 115 per barrel for the year given that it has traded very high already. We are not super bullish on oil in this environment. WTI is going to creep up slightly higher towards mid USD 90 a barrel. We have seen inventory levels in the US coming off in recent weeks, which should support WTI and help it move slightly higher.
Q: You are bearish on metals due to the situation not just in the US but also in China. Can you explain your rationale with respect to base metals in particular and precious metals as well?
A: Currently, demand for precious metals like gold and silver is high in Asia, South East Asia, India and China. However, for industrial metals like copper, aluminum and zinc, there is no substantial demand coming through at this stage. So, outlook for metals depends on whether you look at precious metals or base metals.
Q: What are your levels for copper, aluminium, gold and silver?
A: There is more downside for copper at this stage. It is trading at USD 8,500. We could trade aluminum at as low as USD 2,200-2,300; it is currently at around USD 2,400. If we go into recession in the US and Europe, copper and aluminum could trade as low as USD 7500 and USD 1800, respectively.
Gold will trade above USD 2000 per ounce and silver would trade around USD 45 per ounce before the end of the year. If we go into recession, those levels may move up to around USD 2200 per ounce either at the end of the year or earlier next year. For silver, we would be close to USD 50 per ounce.
Q: What about steel? How is the demand situation currently and what are the levels that you expected in terms of global steel prices?
A: Currently, with high iron ore prices, steel prices have also gone fairly high. We have seen decent demand coming through, however, in the current environment, where we have very sluggish growth in the US and Europe, we believe that even iron ore prices and steel prices could come off slightly towards the end of the year.
Q: Focusing one of the near term triggers, what are the chances of QE3 announcement? And if that happens and liquidity does improve in the market, what sort of impact do you think it is going to have on metals globally?
A: We are not going to see QE this year. There is a possibility of that but it’s not our base case. If we see QE3, the biggest impact would be on gold, silver and platinum, these metals will benefit. If you look at commodities in general, QE3 should positively affect all the commodities.
Q: Do you track crude and if you do, then what is the range you are working with for Nymex and Brent?
A: If we go into recession, we would not be surprised to see both WTI and Brent around USD 70 a barrel. But that’s not our base case. We think that we are not going into recession although growth is fairly sluggish. As a result, Brent is going to struggle to remain above USD 115 a barrel and going to trade between USD 106-115 a barrel for the rest of the year.
Brent should average about USD 115 per barrel for the year given that it has traded very high already. We are not super bullish on oil in this environment. WTI is going to creep up slightly higher towards mid USD 90 a barrel. We have seen inventory levels in the US coming off in recent weeks, which should support WTI and help it move slightly higher.
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