Gold's Path to $1,400 Seen Cleared by Dollar Slump, Equity Fears

“We see a host of ongoing financial market drivers keeping the gold market tight,” Australia & New Zealand Banking Group Ltd. analysts including Daniel Hynes said in a report Thursday. “Further weakness in the dollar and rising risks of a correction in equity markets, in particular, should be supportive.”

The dollar’s decline has come amid expectations that other central banks, notably the European Central Bank and the Bank of Japan, are moving closer to cutting monetary stimulus. In Davos, Mnuchin said “a weaker dollar is good” for U.S. trade, while Commerce Secretary Wilbur Ross said the U.S. would fight harder to protect its exporters. With the dollar “prone and defenseless,” these comments added “fuel to the fire,” said Singapore-based Innes.

With these signals from the U.S. government and other central banks, “we’re getting into a structurally weak dollar, and on a macro level, we could be moving into a cyclical bear market beyond 2018,” Innes said. “All I can possibly see right now, given this overriding weaker dollar narrative, is for gold to go higher in the short term.”

ANZ sees prices holding at current levels in the first half, before pushing toward $1,400 by the end of 2018. A cap on the dollar in 2018 would be useful to U.S. trade and managing the country’s escalating debt burden, said Gavin Wendt, senior resource analyst at MineLife Pty, who also sees gold hitting $1,400 this year.