Gold Price Looks Better In Euro than In USD
New York (May 23) With gold prices expected to trade in a fairly tight sideways channel during the next few months, one commodity brokerage firm is looking at the yellow metal denominated in other major currencies for potential gains.
In a recent report from Sucden Financial, the firm said that they think gold priced in euros has the most potential in the next few months.
“Given the volatile, range bound outlook for spot gold prices denominated in dollars, investors may be well positioned to purchase euro backed gold ETF’s as one way of gaining exposure to currency moves while maintaining a hedge against inflation and geopolitical risk at the same time,” the analysts said in the report.
Kitco.com ’s gold currency charts shows gold trading at €1,119.83 an ounce, up more than 2% since the start of the start of the year. At the same time spot gold last traded at $1,255.70 an ounce, up more than 9% since the start of the year.
Sucden said that it remains optimistic on gold in euro terms because of how undervalued the euro is against the U.S. dollar. They noted that despite euro-focused geopolitical concerns, the euro should continue to strength as a result of improving regional economic growth.
At the same time, weaker U.S. economic growth and the growing political storm in Washington D.C. should continue to weigh on the U.S. dollar. The euro is already starting to see some benefits at is trades near its highest level since November. EUR/USD last traded at $1.11.
“If spot gold reaches our upper bound range as does the euro $1,285 and 1.12 respectively, bullion denominated in euro could reach €1,147/oz,” they said.
At current prices, gold could see a gain of almost 2.5% against the euro and 2% against the U.S. dollar.
European gold demand has been garnering a lot more attention this year as it has been a significant source of investor demand. In its first-quarter outlook, the World Gold Council noted that European gold-backed Exchange traded product saw inflows of 92.4 tonnes in the first three months of the year, compared to 14.1 tonnes added to holding in U.S. ETF.
While some safe-haven demand has diminished following the French Presidential elections, which saw moderate, Emmanuel Macron win, analysts note that there is still a lot of uncertainty surrounding Brexit negotiations and Germany’s election later in the fall.
Source: KitcoNews
