In the Long-Term, Gold Could Reach $4,000 per Ounce, Says Saxo Bank

Siamak Masnavi
  • 23 Apr 2020

On Wednesday (April 22), Ole Hansen, Head of Commodity Strategy at Saxo Bank, presented his outlook on gold during an interview with Neils Christensen, Editor of Kitco News.

Hansen, who joined Saxo Bank in 2008, has been the Danish bank's Head of Commodity Strategy since 2010. He is "the author of the Weekly Commodity Update, which sets out the moves in commodities, and also provides clients with commodity-related trade views under the #SaxoStrats brand", as well as "a regular contributor to both broadcast and print media including CNBC, Bloomberg, Reuters, the Wall Street Journal, the Financial Times and the Telegraph."

Hansen was being interviewed at a time when the spot price for gold was around $1700.

Christensen started the interview by asking Hansen to comment on gold's latets price action. Hansen said:

"Well, I think we've reached a little bit of a plateau here. We're pausing because we got some conflicting news pulling this market right now. 

"We know that the physical demand out of some of the major buyers in China and India is on the weak side.

"We have this recent collapse in the crude oil price, which hit this historical negative level on Monday having an impact on something like Brent Crude, which is now down to the $20 level.

Russia is counting on $40 to balance their budget. So, there is obviously a risk that they may start to sell some of their gold. So, that's adding a little nervousness to the market. 

Next, Hansen talked about how this collapse in the price of oil (due to the huge reduction in demand caused by the current COVID-19 pandemic) could affect the gold market given the risk of deflation that it poses:

"Well, the very cheap fuel prices is obviously keeping inflationary pressure at this stage under control, but I think against that if we look a bit further out, I think from a goal investment perspective, it's not really what's happening today or tomorrow or next month

"It's [about] what lies ahead in six to twelve months and beyond, and I think that if you look out that far, we are basically looking entering into unknown territory.

"We have this phenomenal amount of monetization coming from the central banks, money being pumped into the system...  

"We have a yield curve control in the U.S. coming in. What happens when inflation starts to pick up and yields can't go up? Then, obviously, real yields will have to go down, and I think that has been and will continue to be one of the key drivers for gold over the coming period."

As for his long term gold price forecast, Hansen had this to say:

"if I may copy what my boss has written in his recent pieces, basically looking for $4,000 potentially over the coming years because of this massive experiment that we are having which we thought was bad for the last ten years, which is going to get even worse in the future.

"The dollar strength is going to run out of steam. So, the debasement there is going to have an impact, and then just the whole worry about the sovereign debt... and inflation eventually taking up as well...

"So, if ever there was a time where it made sense to at least put a part of your savings into something tangible, then I think that is now.

"So $4,000 probably [is] a little bit farfetched as the world looks right now, but if you look years into the future, then that is possible because the repercussions of what we're going through right now with the pandemic and the aftermath is going to be something that's going to be felt for at least this generation and potentially beyond."

According to data by TradingView, currently (around 11:58 UTC on April 23) spot gold is trading at $1727.90, up $14.23 (or +0.83%):

TRadingView Chart for Gold on 23 Apr 2020.png

Gold Price Chart Courtesy of TradingView