Saudi Arabia would support oil prices to maintain $60 a barrel, according to Saxo Bank.
Global financial anxiety, the escalating trade war, along with aweaker dollar tops forecasts of international analysts for the fourth quarterof 2019 and 2020.
These factors, despite the risks of recession, will be the mainsupporter of precious metals, primarily the yellow metal, Saxo Bank's head ofcommodity strategy, Ole Hansen said.
It seems that gold, according to Hansen, which did not emergewithin five years of trading in a specific range until it finally reached thelevel of $1485 an ounce, is ready to take advantage of many factors in thecoming months to touch $1,550 an ounce by the end of the year.
Saxo Bank maintains a bullish outlook for gold next year, with afurther 10 to 15% rise in the price of an ounce.
It is not unlikely to see the levels of $1,700 per ounce of gold in2020, according to Saxo Bank's view for the following reasons — the assumptionthat the dollar is heading for further weakness as the US economy continues toslow, uncertainty in the markets due to the US elections, global bond yieldswill remain low, the US Federal Reserve is likely to continue cutting interestrates, while starting another round of quantitative easing, and US-China tradewar and geopolitical concerns about the Middle East will provide significantsupport for safe havens.
While optimism about a trade deal between the US and China may putpressure on gold prices, Hansen sees that prices may be heading for acorrection to rise again, as global economic growth will take time to recoverand stabilize.
Meanwhile, crude oil continues to "swing" between the risk offalling demand as global economic activity slows, and supply risks fromsanctions and conflicts.
The recent attack in mid-September on two Aramco plants showed howimportant Saudi Arabia's role is to stabilizing global supplies, a "positive"point for Saudi Arabia, Hansen said.
While he believes that the risk of oversupply will begin to emergein 2020 as US shale oil production rises, Hansen believes that this willincrease the likelihood that OPEC and other producers will have to further cutproduction to maintain current price levels, which will inevitably be discussedat the next OPEC meeting in Dec.
As the Saudi market prepares to receive Aramco's IPO and starttrading on the company on Dec. 11, Hansen considers that Saudi Arabia may bemoving to support oil prices to maintain the $60 a barrel level in the currentperiod, and later to rise between $65 to $70 in 2020.
In response to a question, Hansen believes that Aramco's upcoming IPOwill boost liquidity in the Saudi stock market, as global investors will rushto subscribe to the world's largest Company's shares.
This will create a "golden opportunity" for the Saudi stock marketto strengthen its position in international markets in line with Vision 2030,and Aramco is the key to such success.
