Analysts at Citigroup see gold hit a new record of up to US$2,125 per ounce over the coming months as financial markets grapple with surging headline inflation, geopolitical uncertainty, and recession tail risks.
Moreover, the bank’s analysts reckon the exclusion of Russians from London’s physical gold market, Swiss refining centres and the Comex bourse may tighten the availability of bullion stocks.
Citi meanwhile said it also sees the silver price higher, at US$29.50 per ounce.
On the London Stock Exchange, the bank sees Fresnillo PLC (LSE:FRES) as having the best leverage to gold and silver pricing – and highlighted the potential upside for the company.
“The investment case for Fresnillo could turn around in next 6-12 months following the three years of declining volumes and higher costs. Silver production volumes should increase in 2022 as mined grades stabilize at existing operation, while visibility on incremental volumes from Juanicipio and Pyrites plants is getting better for the second half of 2022,” Citi said in a note.
“With the share price down 20% YTD, the stock is priced for worst of the cost dynamics to play out in 2022. However, sequential progression of cost in 2H’21 has been flat, while the company has guided for market-driven cost inflation in 2022.”
Citi added: “Moreover, Fresnillo is likely to benefit from incremental investor interest following the suspension of Russian gold stocks from FTSE 100.”
Fresnillo is rated as a ‘buy’ with an £11.00 price target.
On Wednesday afternoon the gold price was down 2.8% at US$1,994 per ounce whilst silver was down 1.1% at US$26.06 per ounce.