Crashing gold price could still rally to record high before year-end: Citi

Don't throw in the towel just yet on gold. While the price of the precious metal is tumbling, at least one broker is predicting new highs for gold by December.

| More on:
gold bars falling to the ground and smashing representing falling prices of ASX gold shares

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Don't throw in the towel just yet on gold. While the price of the precious metal is tumbling, at least one broker is predicting new highs for gold by December.

If this comes to pass, it will be welcomed news for ASX gold miners as the waning gold price dragged these stocks lower.

The Evolution Mining Ltd (ASX: EVN) share price crashed 4.5% to $5.58, Newcrest Mining Limited (ASX: NCM) share price lost 3.5% to $30.78 and Northern Star Resources Ltd (ASX: NST) share price decline 2.1% to $13.32 in morning trade.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) lost around 1% at the time of writing.

Gold losing its shine as it falls from record high

But gold miners are on the nose as gold continues its retreat after hitting a record high of US$2,070 an ounce just last month. The yellow metal entered correction territory as it lost 10% of its value since and is hovering at US$1,864.

The resurgence in the US dollar is taking the shine off the commodity as they tend to move in opposite directions.

Not only is gold priced in the US currency (which tends to depress the gold price when the dollar is high), but they both compete as a safe haven asset.

Gold's got the Trump factor

Right now, investors are favouring green over yellow, but Citigroup doesn't think this will last. It's all thanks to US President Donald Trump, who is fighting for re-election this November.

There's every reason to think that Trump won't hand over the reigns of power if he's defeated at the ballot box.

That means the US could enter into a period of political turmoil that could send tremors through the world's largest economy and financial markets.

Risk not priced into the market

Citigroup believes investors are under appreciating this risk which could send gold surging to a new high, reported Bloomberg.

"[The election] could be an extraordinary catalyst for gold flat price and volatility skew late in the fourth quarter, even though historically there is no clear pattern for gold trading or price volatility into and after U.S. elections," said Citi.

"That is one reason why we expect gold prices to hit fresh records before year-end."

Other golden tailwinds

What's more, the US dollar strength may not last as the country is failing dismally at controlling the COVID-19 outbreak.

The impact of the pandemic is yet to be fully felt by consumers, but that could quickly change.

Also, the extended period of zero interest rates will provide a floor to the gold price, in my view.

This bull run isn't over and it's too early to go underweight on gold or ASX gold miners.

Motley Fool contributor Brendon Lau owns shares of Evolution Mining Limited and Newcrest Mining Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Gold

Image from either construction, mining or the oil industry of a friendly worker.
Gold

Guess which $107 billion ASX 200 gold stock is storming higher today on record results

The $107 billion ASX 200 gold miner is storming higher today. Here's why.

Read more »

Happy man working on his laptop.
Energy Shares

Opportunity knocks: 2 ASX stocks ready to surge

Analysts expect big things from these shares.

Read more »

Miner looking at a tablet.
Gold

Up 58% this year, ASX 300 gold stock reveals 600,000 ounce African MRE

The ASX 300 gold stock is growing its mining footprint in Senegal.

Read more »

A woman in a business suit sits at her desk with gold bars in each hand while she kisses one bar with her eyes closed. Her desk has another three gold bars stacked in front of her. symbolising the rising Northern Star share price
Gold

Macquarie tips 28% upside for this ASX gold mining stock

Let's see what the broker is saying about this miner.

Read more »

An older female ASX investor holds a gangster-style fist pump pose showing off gold rings with dollar signs on them.
Gold

Macquarie says these 3 ASX 200 gold shares will 'outperform' in FY26

Gold shares have been on a long tear and Macquarie reckons these 3 ASX stocks have more room to run.

Read more »

Red arrow on gold bars going down.
Gold

Northern Star share price slides despite $1.2 billion net gold mine cash flow

Investors are bidding down the Northern Star share price today. But why?

Read more »

Miner looking at a tablet.
Gold

The end of the gold rush: Can these ASX Gold shares keep rising?

Has the gold rush run its course?

Read more »

A man in a high visibility vest and hard hat at the wheel of a heavy mining machinery looks backwards.
Gold

Spartan Resources shares rising strongly on final day of trading

S&P Dow Jones Indices will remove Spartan Resources from the ASX 200 and replace it with Infratil.

Read more »