Deutsche Bank AG Chief Global Strategist Binky Chadha said in a Bloomberg interview today:
“The way we think about it is, gold looks to be 20 to 25 percent overvalued,” Chadha said in an interview with Bloomberg TV on Tuesday. “Positioning is very, very long.”
When looking at the U.S. dollar index, as well as global growth, Chadha notes that gold stands out as highly overvalued within the entire commodity/precious metal space:
The metal “did extremely well in the first quarter and that’s when gold got very overvalued and was really part and parcel of the global growth of your trade. But unlike everything else, that actually got unwound,” he said.
Better U.S. and global growth prospects, a crowded bullish trade, and the potential for an interest rate hike from the Federal Reserve later this year are among the headwinds that could continue to push gold prices lower, noted Chadha.
A 25% pullback equates to gold prices around $955 per ounce, a price level that fellow precious metals analyst Taki Tsaklanos identified yesterday as a potential bottom for gold next year.
The SPDR Gold Trust ETF (NYSE:GLD) rose $0.26 (+0.21%) to $121.23 per share in Wednesday morning trading. Year-to-date, the largest ETF tied to the spot price of gold bullion has gained 19.52%.