(Kitco News) - The gold market has made some big gains, rallying to within sight of $1,800 an ounce, but according to one bank, the precious metal still has a long way to go before there is a sustainable shift in sentiment.
In a report Thursday, Georgette Boele, senior precious metals strategist at ABN Amro, reiterated her bearish outlook for both gold and silver. The Dutch bank expects gold prices to average around $1,750 an ounce in the second quarter. At the same time, silver prices are expecting to average the next three months around $24.50.
"The outlook for gold prices remains negative as long as prices are below USD 1,850 per ounce," she said.
The comments come as gold prices have benefited from falling bond yields and a weaker U.S. dollar. The U.S. 10-year yield is currently trading at 1.58%, down 10% from last month's highs. The U.S. dollar index last traded at 91.27 points, down 2% from its more than one-year reached in March.
Meanwhile, the gold market is seeing some technical selling pressure. June gold futures last traded at $1,780.70 an ounce, down 0.69% on the day.
Boele said that she expects the U.S. dollar and bond yields to eventually push higher as the U.S. economic recovery picks up more momentum through the year.
"We expect the recovery in gold prices to run out of steam and prices to weaker again. This is in line with our view that we expect the U.S. dollar to rally again and U.S. real yields to increase," she said.
Although the gold market has seen a significant reduction in bullish speculative interest, Boele said that positioning is still elevated by historical standards and will remain a risk to the market. "Long gold is still a crowded trade," she said.
The Dutch bank also remains bearish on silver. Boele said the precious metal is expected to see strong industrial demand as the global economy recovers; however, she added that silver wouldn't get out from under gold's shadow. A lower gold price will weigh on silver, she said.
