Saudi Arabia would support oil prices to maintain $60 a barrel, according to Saxo Bank.
Global financial anxiety, the escalating trade war, along with a weaker dollar tops forecasts of international analysts for the fourth quarter of 2019 and 2020.
These factors, despite the risks of recession, will be the main supporter of precious metals, primarily the yellow metal, Saxo Bank’s head of commodity strategy, Ole Hansen said.
It seems that gold, according to Hansen, which did not emerge within five years of trading in a specific range until it finally reached the level of $1485 an ounce, is ready to take advantage of many factors in the coming months to touch $1,550 an ounce by the end of the year.
Saxo Bank maintains a bullish outlook for gold next year, with a further 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 in 2020, according to Saxo Bank’s view for the following reasons — the assumption that the dollar is heading for further weakness as the US economy continues to slow, uncertainty in the markets due to the US elections, global bond yields will remain low, the US Federal Reserve is likely to continue cutting interest rates, while starting another round of quantitative easing, and US-China trade war and geopolitical concerns about the Middle East will provide significant support for safe havens.
While optimism about a trade deal between the US and China may put pressure on gold prices, Hansen sees that prices may be heading for a correction to rise again, as global economic growth will take time to recover and stabilize.
Meanwhile, crude oil continues to “swing” between the risk of falling demand as global economic activity slows, and supply risks from sanctions and conflicts.
The recent attack in mid-September on two Aramco plants showed how important 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 emerge in 2020 as US shale oil production rises, Hansen believes that this will increase the likelihood that OPEC and other producers will have to further cut production to maintain current price levels, which will inevitably be discussed at the next OPEC meeting in Dec.
As the Saudi market prepares to receive Aramco’s IPO and start trading on the company on Dec. 11, Hansen considers that Saudi Arabia may be moving to support oil prices to maintain the $60 a barrel level in the current period, and later to rise between $65 to $70 in 2020.
In response to a question, Hansen believes that Aramco’s upcoming IPO will boost liquidity in the Saudi stock market, as global investors will rush to subscribe to the world’s largest Company’s shares.
This will create a “golden opportunity” for the Saudi stock market to strengthen its position in international markets in line with Vision 2030, and Aramco is the key to such success.