Gold Price Increases Amid Some Risk Aversion, Bullish Charts

According to an analyst, it has been recorded that the price of Gold and precious metals may increase in the second quarter, especially given the struggling oil market.

The Head of the Saxo Bank’s commodity strategy, Ole Hansen recognized the sharp decline in the Bloomberg commodity index last month as the commodity sector saw record selling among hedge funds. He added that after rising in mid-February, the momentum has been decreased; hence the funds might shed their estimated bets.

In his quarterly report, released on Tuesday, he said: “The second quarter is unlikely to be the turning point for the index as multiple risks persist within the different sectors.”

The biggest drag on broad-based commodities could be weaker oil prices. Hansen said that the production of oil has been reduced from the Organization of the Petroleum Exporting Countries (OPEC) loses importance from amplified production in the U.S. and among other non-OPEC countries; hence there may be continued weakness in oil.

However, a dull outlook for commodities could refer to increased gold price. Hansen’s comments come as gold tests a key resistance level for the 3rd time in a month. He added that gold’s latest hike comes after a minor correction, an indication of underlying strength in the marketplace.
On Tuesday, June gold futures last traded at $1,257.50 an ounce, up 0.28% on the day. The gains follow an 8.6% rally in the first quarter.

In his second quarter analysis, he further added that “The world is currently facing a collection of geopolitical risks which in numerical terms are the highest we have seen for a long time. This situation is likely to continue to attract demand from investors looking for diversification and a hedge against unforeseen events.”

Talking about the future positioning, Hansen said gold has lots of potentials to grow, the first obstacle remains in place. The market requires breaking struggle at $1,264 an ounce; however, he further said that this is just a matter of time prior to the price increase and he keeps the target of $1,325 an ounce, the year-end target.

Considering silver position, Hansen analyzed that recently estimated positioning is three times higher than the average of five-year, a hint that the market could be responsive to profit taking as hedge funds settle their positions.

He has also stated that he expects by the end of this year the silver prices will reach $19 an ounce. May silver futures last traded at $18.310 an ounce, up 0.57% on the day.