Gold could hit a record before the year-end, aided in part by the risks surrounding the US presidential election, according to Citigroup.
Uncertainty over the contest and delays about the outcome may “be under-appreciated by precious metals markets,” analysts including Aakash Doshi said in a quarterly commodities outlook.
The bank’s forecast implies a surge of more than $200 for bullion futures from current levels.
Gold rallied to an all-time high last month as investors sought havens amid the coronavirus pandemic, but prices have slipped back since then.
Citi’s outlook reflects rising investor concern about the battle for the White House that pits incumbent Donald Trump against challenger Joe Biden.
The already complex race has acquired added tension with President Trump’s plan to speedily replace the late Justice Ruth Bader Ginsburg on the US Supreme Court.
The election “could be an extraordinary catalyst for gold flat price and volatility skew late in the fourth quarter, even though historically there is no clear pattern for gold trading or price volatility into and after US elections”, Citi said.
“That is one reason why we expect gold prices to hit fresh records before year-end,” it said.
Gold futures traded at $1,894.20 an ounce, with prices losing ground this week on a rising dollar.
In addition to the election, Citi is very positive on gold amid low-interest rates, saying it’s in the middle of a bull cycle.
US election day is November 3.
Stocks fell amid warnings from Federal Reserve officials on the need for more stimulus to lift the economy from a coronavirus-induced recession. The dollar climbed.
Fed Chairman Jerome Powell reiterated his view that the economy has made substantial progress, but plenty is left to do, while Vice Chairman Richard Clarida said “additional fiscal support will likely be needed” to bolster the recovery.
The S&P 500 dropped, led by energy and tech shares.
“If stimulus doesn’t happen, if a deal doesn’t get reached, I think we’ll see a more significant turn to the downside,” said Nick Giacoumakis, president of New England Investment and Retirement Group.