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Gold’s Next Target Up to US$2,500/oz: ABC Refinery at RIU Sydney

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THE CONFERENCE CALLER: The gold price has rallied 25 per cent from its 2022 lows and there is “plenty more” potential to drive it higher, delegates heard at the 2023 RIU Sydney Resources Round-up. By Ngaire McDiarmid

ABC Refinery global head institutional markets Nicholas Frappell told the conference he was not surprised gold was currently around the US$2,000 an ounce/A$3,000/oz mark and said the next targets were US$2,100/oz and $2,500/oz.

He said the four macro themes which were dominating 2023 – and would set the tone for 2024 – were banking sector stress, official sector gold buying, the US debt ceiling and Japan’s exit from yield curve control.

“All contain benefits for gold, whether it is market disruption, anxiety over the valuation of other assets or potential impacts on US growth,” he told the conference.

The closure of Silicon Valley Bank and rescue of Credit Suisse meant “investors mindful of risk started piling heavily into gold” in recent months.

In addition, central banks’ reserves have “risen hugely in the last few decades”, increasing circa 10-fold, Frappell said.

“Last year 1,136 metric tons of gold was purchased by the official sector, January and February of this year another 158t, which is a fairly good start to the year,” he said.

He said official sector purchases were not about rejecting the US dollar but portfolio diversification.

As for the US debt ceiling, “or the possibility of the wheels coming off,” it was less than a month away, Frappell said.

The idea that the US might default was not impossible but it was “unthinkable”, he said, adding the Federal Reserve was doing a lot to manage the process.

“If I can sum up what a debt ceiling crisis means is that even if it’s resolved and worked through, what you end up with is market volatility … and generally speaking I would take that as a positive for gold, vis-à-vis other assets,” he said.

The fourth macro theme was the Bank of Japan ending its long-running yield curve control strategy, that’s kept 10-year bond yields around zero, which was “probably good for gold” and “generally dollar negative”.

“The big number in US dollar gold is 2075 [an ounce] … we have to get through that level to really make progress,” Frappell said.

“There is plenty more contained in those four thematics that I mentioned that has the potential to drive gold significantly higher.”

 

RIU Told Gold Could Reach US$2,470 an Ounce

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THE CONFERENCE CALLER: ABC Refinery global head institutional markets Nicholas Frappell held delegates’ attention at the 2023 RIU Explorers Conference as he provided a positive but tempered gold outlook. By Ngaire McDiarmid

“Predicting market direction is always a chance to get things wildly wrong,” he cautioned.

“Russia’s invasion of Ukraine will continue to reverberate through 2023 and large offensives are likely…with consequences that will reshape the kaleidoscope frequently, so obviously bear that in mind in terms of the macro outlook that I make.”

Referring to the Ichimoku Cloud, a data-fuelled technical analysis that charts support and resistance levels and trends, Frappell said it indicated a return to the positive in the medium and long-term.

“Gold price projections going forward, very simplistically, over a monthly chart…[given] the huge double top that we’re aware of at $2,075, suggests a follow up to $2,470,” he said.

In terms of the long-term chart for silver, Frappell said the next upside projection was $28/oz.

The precious metals are currently worth about $1,855/oz and $22/oz respectively on the spot market.

“In summary, now that the US dollar uptrend seems to have reversed, gold appears to have every chance to extend its rally,” Frappell said.

“Beware over-optimistic beliefs around monetary easing – there is scope for more tightness to come and since this presentation was prepared, there’s more evidence to support that.

“The Bank of Japan ending the yield curve control is perhaps the most significant monetary event of the year, I suggest you try and keep wise to that.

“It’s probably more important than changes in the federal reserve expectations.
“Market volatility – not going away anytime soon.

“Gold price targets are remaining ambitious on the upside, and plausible above the 2022 lows of $1,620.”