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Berenberg hikes 2020 gold price forecast above consensus as geopolitical tensions mount

The German bank is forecasting the price of the yellow metal at US$1,525 an ounce for 2020, above Bloomberg consensus of US$1,482

Polymetal International PLC - Berenberg hikes 2020 gold price forecast above consensus as geopolitical tensions mount

Analysts at Berenberg have hiked their 2020 gold price forecast above market consensus amid what they say are “supportive macro and geopolitical factors” lifting the price of the yellow metal.

The German bank has raised its 2020 gold price forecast to US$1,525 an ounce, lower than the current price of around US$1,555 but 3% higher than Bloomberg consensus of US$1,482.

Berenberg cited several “volatile situations in the global geopolitical space” behind its higher forecast, notably ongoing US-China trade negotiations, the potential outcome of Brexit, rising tensions between the US and Iran and the US elections in November.

“It feels that there should be some form of resolution between the US and China over trade in the coming months, and further clarity on Brexit over the same time period; an easing of tensions is likely to weigh somewhat on gold…However, in the background, there remain elevated tensions between the US and the Middle East, and the escalation of tensions between the US and Iran (which have eased somewhat over the last two days) remains an upside risk for gold”, the bank said.

They added that the victory of a “hard left president” in the US elections such as Bernie Sanders or Elizabeth Warren is “likely” to result in stronger gold prices on the potential for radical changes to US government policy.

Meanwhile, Berenberg’s analysts also said it was likely the Federal Reserve will leave US interest rates unchanged until 2021, which they viewed as “supportive for gold” as the metal tends to suffer when interest rates rise.

They added that a pickup in US inflation could potentially provide scope for further interest rate cuts, which could push gold prices upwards.

Polymetal upped to ‘buy’

Berenberg also made changes to its coverage of several gold companies, with FTSE 100 miner Polymetal International PLC (LON:POLY) upgraded to ‘buy’ from ‘hold’ as its target price was hiked to 1,480p from 1,140p.

Analysts said the upgrade factored in the recent rise in gold prices in addition to expectations that the company will increase production by around 13% between 2019 and 2023 to 1.8mln ounces of gold.

Other gold players receiving target price changes were Centamin PLC (LON:CEY) to 127p from 116p, Hochschild Mining Plc (LON:HOC) to 180p from 170p and Hummingbird Resources PLC (LON:HUM) to 44p from 35p.

Shares in Polymetal were 0.1% higher at 1,235.5p in mid-afternoon trading on Monday while Centamin rose 1% at 126.8p, Hochschild fell 1.2% to 167.7p and Hummingbird was 1.4% lower at 21.8p.

Quick facts: Polymetal International PLC

Price: 1266 GBX

LSE:POLY
Market: LSE
Market Cap: £5.95 billion
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