The recent sell-off in gold is unlikely to continue in the longer term, with the precious metal set to hit $1,900 an ounce towards the end of the year, according to Walter De Wet, head of commodities at Standard Bank.
“If the dollar is strong and the euro weak, gold trades lower, but ultimately it de-links, especially when we get more money printing ,” De Wet told CNBC’s “Closing Bell Europe.” “Longer term, we still think it’s going to go up.”
De Wet said two things need to happen for gold to rise. “First of all, we need the uncertainty to settle,” he said. “Like any other assets, gold sells offwhen people want liquidity.”
Second, he said, central banks need to start printing more money. “We see gold really as a currency in this type of environment and ultimately it does trade higher against a paper currency," he said.
De Wet sees physical demand for gold out of Asia rising on current price levels, with demand from India expected to pick up significantly in August and September, “when seasonally they do start buying.”
Gold exchange-traded fund holdings have been flat over the past six months, De Wet said, adding, “but there’s a big shift from ETFs, for example, to bars and coins, especially in Asia. It’s not only the Asian central banks, but the Asian investor, too.”
De Wet said he expects silver to continue to struggle and said rallies should be sold into as long as Chinese stockpiles remain high.
“As soon as Chinese stockpiles are lower, we see upside potential for the metal,” he said. “However, that is unlikely to happen before the fourth quarter.”
—By CNBC’s Tom Mackenzie
CNBC Data Pages:
- Dow 30 Stocks—In Real Time
- Oil, Gold, Natural Gas Prices Now
- Where’s the US Dollar Today?
- Track Treasury Prices Here
No disclosure information was available for Walter De Wet or Standard Bank.