“The sky’s the limit” for gold prices, a senior commodity strategist with ANZ said on Friday, as the precious metal continued its upward trajectory of recent weeks and hovered above $US1285 an ounce.
The comments, from the ANZ’s Daniel Hynes, came shortly after respected American hedge fund manager Ray Dalio recommended investors consider investing a portion of their assets in gold as a hedge against economic and international political risks.
“We like to hedge our bets, though we are never completely hedged,” Mr Dalio wrote in a post on LinkedIn.
“We can also say that if the above things go badly (global geopolitical matters such as North Korea), it would seem that gold – more than other safe haven assets like the dollar, yen, and treasuries – would benefit, so if you don’t have 5-10 per cent of your assets in gold as a hedge, we’d suggest that you re-look at this. Don’t let traditional biases, rather than an excellent analysis, stand in the way of you doing this,” he wrote.
Mr Dalio’s comments were apparently published on the same day that the Dow dropped almost 1 per cent, the S&P 500 dropped 1.45 per cent, and the Nasdaq fell 2.13 per cent, as a wave of selling hit American stocks.
Mr Dalio is the founder and chairman of Bridgewater Associates, a global investment management firm which says it manages about $US160 billion of funds.
ANZ’s Mr Hynes told Fairfax Media that he expects gold to break through the $US1300 an ounce mark “fairly soon”, and then move higher.
“If you look over the medium to longer term we think gold will continue to appreciate. And certainly, our medium term target is for $US1400 an ounce. We’re talking two to three years, or the end of the decade,” he said.
In a report in June Mr Hynes forecast that gold was likely to rise above $US2000 an ounce by 2025.
In the two months since he wrote that report the gold price had performed better than expected, he said.
Asked how high gold could go, Mr Hynes said: “I suppose the sky’s the limit in a sense, because gold isn’t anchored by some of the traditional fundamentals that a lot of the other commodity markets are, ie. around industry cost structures and the like. But also, because consumption of gold occurs in a different dynamic. Essentially, every single ounce of gold ever produced is still in circulation.”
A range of factors were contributing to the rising gold price including the weakening US dollar, political uncertainty and geopolitical risks, he said.
“It’s always been viewed as a safe haven asset,” he said.
Gold will be in the news on Monday as Newcrest Mining, Australia’s biggest goldminer and one of the 10 biggest goldminers in the world, reports its full-year financial results for the 2016-17 financial year.
Newcrest had a strong day on the Australian sharemarket on Friday, closing up 44¢ to $21.85, it’s highest level since late April. The all ordinaries index was down 1.15 per cent on Friday.
In late trade on Friday the gold price was hovering around $US1288 an ounce, just a few dollars below its 2017 high of about $US1293 an ounce.