Large Institutions Expected To Jump Into Gold In H2 – ETF Securities

(Kitco News) - Gold’s bull rally is not fading anytime soon as growing market uncertainty and periods of high volatility continue to provide a tailwind for the market, according to one analyst.

While the second half of the year might not see the same unprecedented demand that defined the first six months, Maxwell Gold, director of investment strategy for ETF Securities, said that gold should have enough momentum to push to $1,400 or $1,450 an ounce.

He warned investors that the market will be sensitive to profit taking due to the strong gains since the start of the year. However, he added that any healthy corrections will create new buying opportunities for investors who have been sitting on the sidelines.

Despite the potential for a short-term correction, Gold said that they see a higher supportive floor for the precious metals. For the second half of the year, Gold said that he expects more fund managers and large investors, who missed the initial rally, to jump into the market.

“We still haven’t seen a move from large asset managers or institutional long-only funds moving into the gold space yet. They are still behind the curve and are probably looking at getting back into the game,” he said.

To describe this sector of the market, Gold used an analogy of a large battleship changing its direction in the water. “It takes a lot of effort to change the stance of some of these funds but I think it is starting to happen,” he said.

Gold said that the precious metals sector is gaining attention from these larger investors because of the structural shift in the marketplace. Growing geopolitical risks, overvalued equity markets, growing central bank balance sheets, and negative bond markets are all factors that are helping to create “episodic volatility” and boosting demand for gold as a safe-haven asset.

“It’s a very challenging environment for investors and asset allocators and with no real alternatives they are turning more and more to commodities and precious metals in particular,” he said.

Not only is investor demand expected to remain strong, but Gold said that demand in India and China should pick up in the second half of the year as well. These two important markets in precious metals have been fairly lackluster in the early part of the year.

“I don’t think India and China were weak because of lack of demand. There were other factors like the jewelry strike that has delayed gold purchases this year. India has seen a good monsoon season that should lead to higher wages and more gold purchases during Diwali and the wedding season,” he said.

Courtesy: Kitco News