Saxo Bank Foresees Further Bullish Movement for Gold This Year

After the price of gold climbed to historic levels during the first half of this year and has since been trading sideways for several weeks in a row, many investors could be wondering whether the bull run has now completed its course and they should take their profits before a trend reversal occurs. Saxo Bank thinks the horizontal price movement is just a pause and there is plenty of room for additional upward movement.

Ole Hansen, who heads commodity strategy at the investment bank, refers to the current sideways price movement as a time of consolidation within the market. He points out that after registering gains of 26% in the first six months of the year, the market is simply taking a pause before further movement is manifested.

Hansen points out a number of factors that strongly suggest the upward momentum of gold is not yet over. First, he says the possibility of the Fed cutting interest rates has increased after Trump’s tariffs have started being implemented. There are concerns that this could slow economic growth, and these fears are a tailwind for gold.

Demand for gold by central banks is also strong and persistent. Many central banks, particularly that of China and several emerging economies, are buying gold to diversify their reserves. Dedollarization is also pushing many central banks to increase their gold holdings. As this demand persists, the upward pressure on the price of gold is likely to remain, Hansen believes.

The increasing risk of stagflation in the United States also favors further upward momentum for gold. There are concerns that stagflation is becoming a real possibility for the U.S., especially given that the turmoil triggered by tariffs could result in deeper cuts to the Fed rate. Investors could then switch to the haven asset, gold. With tariffs starting to kick in, this is s a development worth tracking over the coming weeks and months.

There are also mounting concerns about the fiscal policy of the United States. The recently passed budget bill is set to further increase the country’s deficit by more than 3 trillion dollars. Concerns about the sustainability of such high deficit spending are likely to encourage more investors to seek safe harbor in gold.

Saxo Bank’s outlook may change if gold drops to below $2, 945 an ounce, a price it surpassed in October 2023. As things stand, conditions look primed for entities like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) to attract more investment and deliver shareholder value given the rising demand for gold, platinum and other precious metals.

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