Gold prices to rise further on Fed and European uncertainties, analysts say

Gold prices have seen a rebound after the U.S. Federal Reserve raised its benchmark rate by 25 basis points last week. Since then, the weakness in the dollar has led to further strength in gold prices.

The precious metal hit a two-week high on Monday as the dollar plunged to a 6-week low after the Fed's dovish outlook on the pace of rate increases this year continued to disappoint dollar bulls. But a number of analysts believe that gold will continue to rise further.

Nitesh Shah, director, economist and commodity strategist at ETF Securities, told CNBC via email that he expects gold prices to rise to US$1300 by mid-year.

We expect gold to rise to US$1300/oz by mid-year (over 5% gain), before declining back to current levels by year-end. A dovish Fed will be met by inflation surprises over the coming quarter, which will lead to further decline in real interest rates"

Gold is down more than 4 percent since the day of the U.S. election but the precious metal has managed to pare losses and is up nearly 7 percent since the start of the year.

Swiss investment bank UBS said sentiment towards gold so far this year has been broadly positive yet fragile. The note further says that many investors have been caught off guard by gold's resilience over the past couple of weeks and part of this resilience is because of the lingering political uncertainty in Europe.

Source CNBC

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