Gold prices extended their recovery on Friday after rebounding from June’s sharp correction, with RBC Capital Markets arguing that the longer-term bull market remains intact despite recent volatility.
The price of Gold in US Dollars (XAU/USD) traded near $4,165, up almost 1% on the day after climbing more than 3% so far in July.
The rebound follows an almost 12% decline in June, when prices briefly fell below $4,000.
RBC believes the recent correction has not changed the broader investment case for gold.
“While we remain of the view that gold’s upside story is not over, there remains the risk of near-term weakness.”
The bank says its downside scenario still represents a firm floor for prices, while the balance of risks is now shifting back to the upside.
“We think risk is skewed to the upside in the medium term, especially towards year end.”
RBC analysts argue that many of the bearish factors, including higher bond yields and a stronger US Dollar, are already reflected in current prices.
“We think it’s a mistake to hinge our view on the current consensus views being baked into gold prices.”
Instead, the bank predicts renewed demand as investors respond to geopolitical uncertainty and long-term fiscal concerns.
“We think central banks remain supportive and that investors will not sit on the sidelines indefinitely.”